Regional Unemployment Update: Growth Trajectories Suggest Uptick In Unemployment
BMI View: A generally weak economic growth outlook will see unemployment rates across most of Latin America's major economies tick up in 2014. That said, demographic factors and the lasting effects of government reform drives to cut back on informalities in the region's labour markets will prevent a rapid spike in unemployment. Moreover, we highlight Mexico and Colombia as two exceptions, with stronger growth rates likely to see labour market conditions tighten from current levels.
We forecast that the average unemployment rate in all of Latin America's largest economies except Mexico and Colombia will rise in 2014, as economic activity moderates or remains relatively weak throughout the region. Slow real GDP growth will unwind some of the labour market gains experienced by Latin American economies over the last several years, when strong economic expansion and reforms to cut back on high levels of informality and reduce underemployment took hold ( see 'Regional Unemployment Update: A Mixed Bag In The Medium Term', May 3).
Through September, unemployment rates in Latin America's seven largest economies are all below average levels seen in the prior five years, illustrating the tighter labour market conditions that have enveloped the region amidst rising investment in commodity exporting industries, such as mining and agriculture, and labour-intensive domestic industries like construction. Moreover, we highlight that a demographic advantage - low levels of growth in the size of regional labour forces - will help insulate several countries from seeing sharp spikes in joblessness. However, employment figures tend to be lagging economic indicators, and we believe that the current low unemployment rates do not fully reflect the weaker trajectory of growth in the region, which will see average jobless rates uptick in the coming years.
|Most Regional Unemployment Rates Are Close To Bottoming Out|
|Latin America - Average Unemployment Rate, % (LHS) & Annual Average Real GDP, % chg (RHS)|