The Labor Market: Opposite Signs
It is known that the labor market is one of the last to recover after the end of a recession. Therefore, the unemployment rate should continue to rise in the coming quarters, but some positive signs have started to appear. At the same time the jobless rate continues to climb steeply, wages have shown hints of recovery. What is the reason for this apparent contradiction? In this Report we evaluate these signs, concluding that extreme caution is necessary in interpreting their reflections on economic activity.
The unemployment rate reached 13% in December 2016, and since July had been rising by an average of 0.3 percentage point a month, without showing any deceleration. In the last quarter of 2016, the occupied population remained relatively stable, so the increase of unemployment was due to the growing number of people looking for work. The participation rate – the quotient between the number of people employed or seeking employment and the working-age population – reached 61.5% in December against 61.1% in September. Might the increase in the participation rate attenuate the negative signs sent by the rising unemployment rate? The answer is not easy. Instead of indicating an increase in the hope of finding a job, it might reflect the poor financial situation of households, prompting members to (re)start the hunt for jobs. The high proportion of consumers who say it is hard to find work points to the less favorable explanation. Besides this, the stability of the occupied population in the fourth quarter hides the greater precariousness of the job market, with a declining number of people having formal employment contracts.
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