Entrevista de Fermin Koop, 26-3-2019
A comienzos de abril la nota apareció en
The Essential | Issue XXI | April 4, 2019 | Buenos Aires, Argentina :
Unemployment on the way to two digits as production slumps Fermín Koop
With unemployment figures close to two digits according to the latest report from the INDEC statistics bureau, analysts believe that joblessness figures could get worse if the economic crisis continues, reaching numbers not seen since the beginning of the Kirchnerite decade.
Unemployment rose almost two percentage points in the last quarter of 2018 when compared to the same period of 2017, reaching a 9.1 percent rate. This means that the number of people unsuccessfully looking for a job in the 31 urban agglomerates measured by the statistics bureau reached 1.9 million, growing by 417,000 on the last twelve months.
Nevertheless, the figure was still similar to that of previous quarters of the crisis-laden 2018 (around 9 percent) and below the expectations of most consultancies, which still warn that there’s room for things to get worse in 2019, depending on the evolution of the peso in currency markets and Central Bank policy on interest rates.
“The government hoped for a different start of the year, aiming at a slower inflation rate and a different horizon ahead. But this never happened and now it seems highly likely that we will reach two-digit unemployment soon,” University of Buenos Aires’ economist Javier Lindenboim told The Essential.
The hike in unemployment was partly a consequence of a 2.6 percent decline in the country’s GDP last year. The economy was affected by the steep devaluation of the peso caused by a decline in foreign funding and a drought that hit the agricultural sector, as well as spending cuts that resulted in lower consumption.
More cuts in salaries than positions The fact that unemployment remained below two digits last year shows that the companies’ budget cuts amid the crisis were done mainly on the compensation paid to workers, experts told The Essential, highlighting that salaries’ purchasing power dropped about 12 percentage points in 2018, while firings didn’t rise as dramatically.
This came along with suspensions in many sectors such as industry and vehicle markers, with factories that shut down for weeks or even months. “The lower incomes led to lower labor costs, which meant the flow of redundancies was lower than the economic decline,” Ecolatina consultancy said on a report.
However, the drop in salaries does feed joblessness figures in another way, as more household members go on the hunt for a job to make up for the lost purchasing power.
“There are more people from the same home trying to find employment to afford the same things than before,” Ecolatina argued. Technically, a person is not considered unemployed if it is not actively searching for a position. The rising number of people struggling in the job market also included an increase in underemployment — people who work fewer hours than they demand — from 10.2 to 12 percent, as well as people with a job that are now looking for a better one, from 14.7 to 17.3 percent.
“One of every five active workers actively looked for a new job on the last quarter of the year, possibly to increase their income levels,” Ecolatina said.
Demographic breakdown The largest increase in unemployment was registered in the trade sector, with 36,300 fewer employees, and the industrial sector, with 61,000 fewer workers.
Women below 29 years old were the most affected by joblessness, as the rate reached 21.4 percent in that sector from 18.8 percent a year ago, while for men in the same age bracket the figure rose from 11.4 to 15.4 percent. Geographically speaking, the increase in unemployment was especially felt in big cities such as Bahía Blanca, Tucumán, Mar del Plata and Entre Ríos. The highest rates were registered in Rosario and Mar del Plata, with 12.8 percent. In absolute terms, the Greater Buenos Aires had the record of 644.000 people without jobs.
“Some sectors such as construction were the ones that started feeling the economic crisis the soonest, so it makes sense for them to have the largest unemployment rates. It was a combo of uncertainties, high interest rates and lower sales,” Soledad Pérez Duhalde, an economist at Abeceb consultancy, told The Essential.
INDEC’s report was in line with figures made public last month by the Production and Labour Ministry, which said 2018 ended with 191,300 fewer registered workers. The private sector was the most affected, with 130,800 jobs lost.
In addition to this, it is worth to remember that according to official data, the Argentine Government will need up to US$ 31 billion to pay debt services and maturities during 2019. The IMF will provide only US$ 22.5 billion.
Bleak scenario Looking ahead, economists agree that the labor crisis hasn’t peaked yet. The uncertainties on the currency market mean that the government is unlikely to provide short-term relief on interest rates, which are affecting the structure of small and medium-sized firms in the country, the largest employers.
“The first quarter of the year will likely bring higher unemployment rates. As it usually happens at the beginning of each year, there are more people trying to join the labor market. But if they don’t have any luck, which is likely, the number of people without jobs will grow,” Lindenboim said.
At the same time, the only sector expected to recover is agriculture, but it has limited possibilities of job creation due to its mechanization. Other job-intensive sectors such as industry and trade will likely continue struggling all year long, with no capacity to take new employees.
Based on a survey by the consultancy Manpower among 800 companies in Argentina, the net expectation of hiring workers is at zero percent for the second quarter of 2019.
“Even if we agree with the official hypothesis of the economic drop reaching its peak, the labor market wouldn’t recover,” Ecolatina said. “It was the last one to react to the crisis and it will be the last one to react to the reactivation of the economy, when it actually happens.”
Fermín Koop is an economic and environmental journalist from Buenos Aires. He is an editor at Diálogo Chino and co-founder of Claves 21.