In April, for the second consecutive month, the growth rate of employment was higher than that of the labor force, but this time it was reflected in a drop in the unemployment rate.

In effect, the employment rate registered an annual growth of 3.7%, which is consistent with the creation of 333 thousand new jobs in year-on-year terms, of which 31 thousand were created in April. Meanwhile, the labor force increased by 16 thousand people in April, thus growing at an annual rate of 3.5%, which meant an entry of 349 thousand people into the labor market, compared to the same month of 2023.

This brought the unemployment rate to 8.5% for the mobile quarter ended in April, that is, a year-over-year decrease of 0.2 percentage points. In seasonally adjusted terms, the figure remained unchanged from the previous one at 8.4%.

So is it time to celebrate the employment gains from the April INE labor market bulletin? It seems perhaps a bit early for that.

First of all, we should not forget that, despite the drop in unemployment recorded in April, from a historical perspective, the unemployment rate is still high. In fact, this last figure is one percentage point above the average unemployment rate of the last 14 years in the country.

That said, employment data continue to reflect structural problems in the local labor market, which, far from being solved, have been amplified. An example of this is that, for example, informality continues to rise. In April, the informality rate rose to 28.2%, the highest observed since December 2021, which, of course, occurs at the cost of a decrease in the formal employment rate. Also, demand for labor remains weak in the formal component, so additional employment gains are likely to continue to occur informally. Furthermore, although informality cuts across all economic sectors, it is more prevalent in agriculture, construction, commerce and domestic services.

The unemployment rate also continues to be higher for women than for men. So far this year, the number of unemployed women has been rising to a rate of 9.5% in April, the highest in the last year. In contrast, the unemployment rate for men has been steadily declining to 7.8% this past month, the lowest since February 2023.

But it is not to say that everything is bad either. Part of the good data is that the figures for both the labor force and the number of employed persons have already managed to catch up after the major disruptions generated by the pandemic; they have recovered their trend and are now higher than those recorded before the arrival of Covid. However, it should not be ignored that some sectors such as agriculture, construction, accommodation and entertainment still have difficulties in recovering employment levels.

So what should we expect in terms of employment going forward? Well, it is true that the first few months of the year saw some gains in employment, probably associated with marginally better than estimated activity figures, but we do not necessarily expect a major rebound in job creation in the coming months. This is mainly because growth expectations for the year remain low. According to the latest national accounts report, the economy grew 2.3% annually in the first quarter and, for the year, expectations are in a range between 2.0% and 3.0%. Furthermore, much of this growth will come from the external component.

Regarding projections for the unemployment rate, the consensus of both local and external analysts averages 8.5%. By 2025, the unemployment rate is projected to be slightly lower than at the end of 2024, but still above 8%.

It therefore seems imperative to encourage the implementation of measures, policies and strategies that stimulate growth, with the consequent expected gains in terms of employment for the economy.

Milene Rodriguez
Strategy and Investment Analyst