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Chile: unemployment increased in Jul-16, despite a relevant self-employment creation

 

August 31, 2016 (Investorideas.com Newswire) Today, the INE released the employment figures for the May/Jul-16 quarter. The unemployment rate increased to 7.1% (from 6.9%), close to market consensus and our forecast (7.0% both). Lower private and public jobs creation was offset again by a relevant increase in self-employment. By economic sectors, weakness remains with the exception of manufacturing, as a decrease of jobs creation was observed in agriculture and construction. We expect that lower fiscal spending and usual self-employment volatility could add some pressure over employment figures in the coming months.

Unemployment rose to 7.1%, slightly above the markets’ expectation and our forecast (7.0% both). The unemployment rate reached a level above 7.0% for the first time since Nov-11, mainly due to an increase in male’s unemployment (6.9% vs. 6.6% previously). The number was explained by a small decrease in employment (-0.04% q/q) and a 0.2% q/q increase in labor force.

Private and public jobs creation lost strength, with ~30,000 lesser workers. In the last five quarters, private wage earners lost job positions, meanwhile public jobs creation posted its first decline since Mar-16. Considering recently released figures, public investment is not showing signs of deceleration (+4.2% YTD vs. -0.5% y/y expected). We expect lower growth of public jobs in coming quarters amid lower fiscal investment.

Self-employment keeps on track, adding some downside risk for coming quarters. The previous negative figures have been offset by a relevant increase in self-employment, which added more than 120,000 job positions in the last year. This employment source is usually accompanied by significant volatility, thus implying a downside risk for next quarters.

Relevant increase in manufacturing employment counteracts overall sectors weakness. During Jul-16, manufacturing added more than 26,000 jobs, well-above its seasonal pattern, which was offset by an overall deterioration in other sectors. Particularly, we highlight the fact that agriculture experienced more than 33,000 jobs losses. Moreover, construction kept its downward trend, losing more than 13,000 jobs in the last quarter. We expect this trend could continue in coming quarters due to lower dynamism expected for the sector after tax reform effect dissipates.

Rising unemployment on the horizon. Despite the seasonal effects that are affecting employment figures, most of the relevant sectors are creating less jobs positions than the previous year’s average. We assume that some transitory effect persists, including fiscal job creation and high self-employment, which could not persist in the remaining months of 2016. Hence, we cannot rule out the possibility of higher unemployment in next releases.

For charts, tables and the full report, see the attached file.

Regards,

Daniel Velandia O., CFA
dvelandia@credicorpcapital.com
(571) 3394400 Ext. 1505

Felipe Guzmán C.
fguzman@credicorpcapital.com
+(562) 265 19 385

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