ILO: Unemployment continued to fall in Latin America and the Caribbean but will rise from 2015

Mexico City, December 12, 2014.- The International Labour Organization (ILO) reported an unusual pattern in the urban unemployment rate in Latin America and the Caribbean during 2014, which continued to fall despite the economic slowdown.

However, the Organization warned that slow growth has begun to impact the labour market. "There are warning signs," said Elizabeth Tinoco, ILO Regional Director for Latin America and the Caribbean, who presented the report in Mexico. “The concern is that we are creating fewer jobs despite unemployment remaining at a low level”.

Tinoco launched the 2014 edition of the Panorama Laboral de América Latina y el Caribe 2014 (Labour Overview for Latin America and the Caribbean 2014) in Mexico City, highlighting the region’s urban unemployment rate of 6.2 per cent for the third quarter of 2014, which is expected to reach 6.1 per cent at the end of this year – 0.1 per cent below the rate for 2013. "We are talking about almost 15 million people unemployed," she said.

The annual ILO report stresses that economic growth forecasts for this year have been revised downwards to 1.3 per cent by the International Monetary Fund (IMF), which expects them to rise moderately to 2.2 per cent in 2015.

Although unemployment has not risen due to this slowdown in growth, there has been a sharp reduction of new jobs reflected in the employment rate, which fell by 0.4 percentage points to 55.7 per cent in the third quarter of 2014. "This means that at least one million jobs less have been created," Tinoco said.

Jobseekers dropping out

The ILO report explains that this unusual unemployment trend is a result of people dropping out of the labour market, reflected by a decline in the labour force participation rate, which masks the effects of the fall in employment generation.

This low rate of labour market participation means that "many people, mostly women and young people, stopped receiving household income”.

The labour force participation rate appears to have reached its lowest level. The ILO report predicts that next year, with increased participation in a context of weak growth, unemployment could rise.

According to the ILO, the urban unemployment rate may reach 6.3 per cent in 2015, which means that there will be some 500,000 more unemployed in the region.

"Many people who temporarily left the workforce in 2014 will return to search for a job next year, together with young people entering the labour market. The region will have to create nearly 50 million jobs over the coming decade, just to offset demographic growth,” Tinoco said.

Wage growth also decelerated in 2014, while the number of employed went down.

Uncertain scenario

This scenario of uncertainty comes after a decade in which the region enjoyed significant economic growth. The unemployment rate dipped to record lows and allowed for a higher quality of jobs.

According to the report, current forecasts that growth could be weak for several years raised "concern that we cannot make further progress or that the trend may be even reversed”.

Moreover, in a context of moderate growth, it would be even more difficult to address the remaining challenges, especially in terms of the quality of employment, in a region where 47 per cent of urban workers work in the informal economy.

"So we have to face the huge challenge of rethinking strategies to push growth and a productive transformation of the economy to foster economic and social inclusion through the labour market," Tinoco said.

The ILO called on countries in the region to prepare for the possibility of a labour market which has to take specific measures to stimulate employment and protect individual incomes.

Other findings

- The 2014 Labour Overview of Latin America and the Caribbean also shows that: The situation of countries in the region is heterogeneous, and the economic downturn does not impact them equally.

- Formal average wages rose by 1.7 per cent (third quarter 2014) compared to 2 per cent last year (based on information from eight countries).

- Minimum wages rose by 2.1 per cent (third quarter 2014) compared to 2.9 per cent in 2013 and 6 per cent in 2012.

- The urban unemployment rate of young people dropped from 14.5 per cent to 14 per cent but remains between 2 and 4 times higher than that for adults.

- 40 per cent of the unemployed in the region are youth.

- The participation of women in the labour market has risen, but is still 30 per cent lower than that for men.

- The unemployment rate for women is 30 per cent higher than that for men.