Itaú BBA - COLOMBIA – Mixed labor market signs in November

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COLOMBIA – Mixed labor market signs in November

Dezembro 27, 2019

We expect only a gradual improvement of the labor market in 2020, so the central bank will likely remain on hold.

The November national unemployment rate of 9.3% was above the 8.8% recorded one year earlier, explained by higher urban unemployment. The urban unemployment rate increased to 10.4% from 9.8% one year earlier, closer to our 10.3% expectation than the Bloomberg market consensus of 10.1%. Meanwhile, total employment grew 1.8% yoy in November, following seven consecutive months of drops, leading to the first participation rate increase since March 2019, by 0.7pp from November last year to 63.7%. The incipient signs of improvement in employment could be countered by the announced minimum wage increase of 6% for 2020, above labor productivity and the expected inflation by the yearend (Itaú: 3.8%).

Despite some improvement in monthly figures, labor dynamics remained broadly poor in the quarter ending in November. The national unemployment rate came in at 9.8% in the quarter ending in November, rising 0.7pp over twelve months (10.6% in 3Q19). The total employment fall moderated to 0.5% YoY (115 thousand jobs shed), from the 1.8% contraction in 3Q19. Leading the job destruction was self-employment (-4.4% in the quarter ending in November vs. -6.5% in 3Q19). Job shedding was concentrated in farming, manufacturing and real estate activities. On the positive front, the creation of private salaried jobs (mainly in construction and social and communal services) gained momentum (4.0% yoy vs 3.2% in 3Q19). Once adjusted for seasonal factors, the total unemployment rate in the quarter was 10.7%, stable from 3Q19 (10.3% in 2Q19), as a rural improvement countered a higher urban unemployment rate.

The average unemployment rate for 2019 would come at 10.3%, above last year’s 9.7%. Moreover, we expect only a gradual improvement of the labor market in 2020, so the central bank will likely remain on hold (at 4.25%) for the time being despite inflation edging close to the central bank’s upper bound and the wide current account deficit.
 

Miguel Ricaurte Carolina Monzón



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