Chilean jobless rate likely rose in October, labor market to weaken further in medium term

Chile’s jobless rate is likely to have increased in October. The Chilean economy at present is expanding below its trend rate of around 2.5 percent. The government’s counter-cyclical fiscal spending, on the growth front is probably keeping resource utilization at a high level. The labor market had remained resilient in this low growth environment and the jobless rate continues to be low by historical standards due to higher self-employed.

But the unemployment rate began adjusting in 2016 and is likely to have risen by one tick to 6.9 percent in October from September’s 6.8 percent, said Societe Generale in a research report. This is based on recent trends in the labor market and assuming that the labor force and employment grew 1.6 percent year-on-year and 1 percent year-on-year, respectively.

Furthermore, the number of job vacancies has reduced by half in the last two to three years, while wage growth has also decelerated. Nominal wages, on an average, rose 5.1 percent year-on-year in the third quarter, the lowest growth in 23 quarters, noted Societe Generale. Chilean labor market is expected to weaken further from the current levels in the medium term.