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COLOMBIA – Labor market hard-hit in April as dual shocks strike

Maio 29, 2020

Additional labor market loosening ahead is in line with a significant consumption decline this year.

The Colombian labor market loosened significantly in April as the deteriorated economic outlook and social distancing measures filtered through to job losses. The national unemployment rate came in at 19.8% in the month of April, up 9.5pp over twelve months, even with a notable 10.4pp drop in the participation rate (to 51.8%). The declining participation rate is a consequence of the social distancing measures as more people are not able to look for jobs or be available to work. The urban unemployment rate came in at a higher 23.5% (11.1% one year ago), well above the 15.4% Bloomberg market consensus and our 15.1% estimate. In the quarter ending in April, the total unemployment rate rose 3.6p to 14.6%. Employment contracted 24.5% yoy in April, the sharpest decline on record (2.7% fall in 1Q20). 

The 10.6% annual decline of jobs in the quarter ending in April was the sharpest fall this century (5.9% decline in 4Q06 was the previous worst). Job destruction was widespread in the quarter, from mild shedding of public salaried jobs (3.3% yoy; 1.2% drop in 1Q20), to an 8.5% self-employment decline (3.6% fall in 1Q20) and a 12.1% shedding of private salaried posts (1.7% down in 1Q20). Commerce led the job shedding, but job destruction was broad-based (gains were only seen in the utility sector).

Additional labor market loosening ahead, as the nationwide lockdown persisted for two further months, is in line with a significant consumption decline this year. Downbeat economic expectations, amid low oil prices and uncertainty, would hinder investment dynamism. We see an activity contraction of 4.7% this year, with risks tilted to an even deeper decline. In this line, we see room for the central bank to ease monetary policy further. 
 

Miguel Ricaurte
Carolina Monzón



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