Itaú BBA - COLOMBIA – Some labor market positives in 4Q19

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COLOMBIA – Some labor market positives in 4Q19

Janeiro 31, 2020

If the labor market shows some improvement ahead, the central bank would not need to increase the monetary stimulus.

The unemployment rate increased for the fourth consecutive year in 2019, but there were some encouraging signs at yearend. The urban unemployment rate for the month of December came in at 10.5%, below the Bloomberg market consensus of 11.0%, while close to our 10.3% call. The jobless rate was 0.2pp below that from December 2018 as employment grew 1.5% yoy (0.3% average for 2019), while the participation rate was broadly stable. Overall, the urban unemployment rate during 2019 averaged 11.2% (10.8% in 2018), and the national unemployment rate came in at 10.5%, up 0.8pp from 2018. After a prolonged period of gradual activity recovery, we expect the labor market to show some tightening throughout this year.

Urban labor market dynamics improved in 4Q19 as employment growth accelerated to the fastest pace since 2Q15. In 4Q19, the urban unemployment rate was 10.4% (0.2pp up from 4Q18), while the national unemployment rate picked up 0.4pp to 9.5%. The rise in the total jobless rate over twelve months was significantly milder than the 1.1pp increase recorded in 3Q19, while the drop in the participation rate moderated noticeably. Urban employment grew 1.4% yoy (0.2% drop in 3Q19), while national employment was broadly flat from 4Q18 (1.8% fall in 3Q19). Public job posts fell 5.3% yoy (1.2% drop in 3Q19), while self-employment declined 2.0% (moderating from the 6.5% fall in 3Q19). On the other hand, driving job growth were private salaried posts (stable at 3.1% yoy). By sector, agriculture and real estate activities were the main drag in the quarter, while commerce and construction drove job creation.

With the activity recovery consolidating further, the labor market would show some improvement ahead with the unemployment rate narrowing to 10.0% this year (10.5% in 2019). In this context, we do not see the need for the central bank to increase the monetary stimulus ahead. 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.

Miguel Ricaurte Carolina Monzón

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