Itaú BBA - COLOMBIA – Favorable urban labor market developments in January

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COLOMBIA – Favorable urban labor market developments in January

Fevereiro 28, 2020

Labor market developments in urban zones is in line with a prolonged period of activity recovery and elevated business confidence levels

The unemployment rate in January surprised to the upside, despite favorable dynamics on the urban front. The national unemployment rate increased to 13.0%, from 12.8% one year ago, coming in above our 12.6% forecast. The deterioration was mainly due to the rural component (13.1% from 11.9% one year earlier), while the urban unemployment rate moderated to 12.9%, below the 13.7% print last year and the market consensus of 13.8% (Itaú: 14.1%) as employment growth accelerated to its fastest pace (2.8% yoy) since mid-2018. In the quarter ending in January, the total unemployment rate was 10.6%, up 0.2pp over twelve months, notwithstanding the urban unemployment rate edging down 0.1pp to 11.3%. The labor market developments in urban zones is in line with a prolonged period of activity recovery and elevated business confidence levels.

Private-salaried job creation is driving the labor market dynamism. Total employment increased 0.2% yoy in the quarter, the first positive print since 1Q19, while the participation rate continued to fall 0.6pp over twelve-months to reach 63.3%. In the same period, urban job growth was 2.1% (0.3% average in 2019) and participation increased by 0.4pp to 66.1%. Overall, private salaried posts grew 2.9% yoy, in line with last year’s growth rate, while a shrinking public wage bill (down 4.7% following the 5.3% drop in 4Q19) is in line with targeted fiscal consolidation. By sector, agriculture and manufacturing activities were the main drag in the quarter, while food and hotel services along with commerce drove job creation.

The gradual economic recovery is expected to filter through to a more dynamic labor market this year. A mildly expansionary monetary policy, improving business and consumer sentiment amid controlled inflation would support some tightening of the labor market. We expect the unemployment rate to moderate to 10.0% this year from 10.5% in 2019. We note that our expectation faces upside risks from continued immigration from Venezuela and weakness in agricultural production, which partly explained the loosening last year and an external shock that could hinder the domestic growth outlook.
 

Miguel Ricaurte
Carolina Monzón



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