Chile’s jobless rate likely rose in August, labor market may weaken further in medium-term

Chile’s jobless rate is expected to have continued to rise in August. The country’s economy is expanding below its reduced trend rate of lower than 2.5 percent from more than 4 percent just a couple years ago. On the economic growth front, the Chilean government’s counter-cyclical fiscal spending is possibly maintaining resource utilization at a high level and any rebound in growth from present level seems unlikely at the moment due to the difficult external environment, said Societe Generale in a research report.

The labor market has continued to be resilient in the midst of this low-growth environment and the jobless rate continues to be low by historical standards, owing to higher self-employment. But the jobless rate has began adjusting and it is likely to have increased further  to 7.3 percent in August from July’s 7.1 percent, based on the labor market’s recent trends and assuming the 0.7 percent year-on-year growth in employment and 1.6 percent year-on-year growth in the labor force, added Societe Generale.

Furthermore, the number of job vacancies has halved in the last two to three years and wage growth has also decelerated. Nominal wages had grown 4.9 percent in July, the slowest growth rate in nearly 6.5 years.

“Over the medium term, we expect the labour market to weaken further from current levels”, noted Societe Generale.