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ECLAC and ILO: Latin American and Caribbean Unemployment Seen Rising in 2016 Due to Regional Economic Deterioration

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11 May 2016|Press Release

The evolution of labor markets in the region will be analyzed at ECLAC’s thirty-sixth session, to be held in Mexico this month.

The evolution of labor markets in Latin America and the Caribbean during 2016 will generally be negative, due to forecasts for a more deteriorated macroeconomic context and growth levels than last year and to the weakening of some employment indicators, ECLAC and the International Labour Organization (ILO) said in a joint report released today.

The United Nations organizations point out in a new edition of Employment Situation in Latin America and the Caribbean that these factors, especially the low dynamism in job creation, will likely lead to an increase in urban unemployment of more than half a percentage point (0.5) in 2016 versus 2015.

“The process of continuous improvement of labor indicators that benefited the region during much of the last 15 years halted in a more unfavorable global macroeconomic context,” Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), and José Manuel Salazar, Regional Director of ILO for Latin America and the Caribbean, stated in the document’s foreword.

“This underscores the importance of taking measures not only to mitigate the effects of the crisis in the short term, but also to tackle the gaps and lags over the longer term, such as scarce productive diversification, productivity gaps, high informality and inequality,” they added.

The Regional Director of ILO will be one of the special participants in ECLAC’s thirty-sixth session, to be held in Mexico City from 23 to 27 May. In the event, Salazar will deliver a presentation in the round table on regional dimension of follow-up to the 2030 Agenda for Sustainable Development, which includes a series of goals related to inclusive growth and decent jobs.

The report provides an overview of the performance of Latin American and Caribbean labor markets in 2015. It indicates that, mainly as a result of a slight contraction in regional Gross Domestic Product (GDP), that year the average unemployment rate recorded its first increase since 2009, rising to 6.5% in 2015 from 6.0% in 2014.

That increase was produced by greater numbers of job seekers entering the labor market compared to previous years, who did not find the necessary quantity of jobs due to the weak creation of salaried employment—which reflects the low dynamism of economic activity, the study adds.

In addition, at a regional level job quality deteriorated because, in light of the dearth of sufficient salaried positions, self-employment expanded and was generally of lower quality.

According to the document, the weakness in job creation in 2015 was manifested in the third consecutive annual decline in the employment rate (by 0.4 percentage points), which implied a reduction in the number of wage income earners per household. This fall in income has played an important role in the estimated poverty increase for 2015 (to 29.2% of the region’s inhabitants, according to ECLAC’s latest projections).

Nevertheless, ECLAC and ILO stress that the deterioration of employment and unemployment indicators is not a widespread phenomenon in the region.

In 2015, the unemployment rate increased in just seven of 19 Latin American and Caribbean countries, while in nine others it fell and in the remaining three it held steady. In general, in Central American countries, Mexico, the Dominican Republic and the Caribbean nations the labor market’s evolution was more favorable than in South America, whose performance was affected by the impact of the external context on its economic activity and inflation, among other factors.

The current edition of Employment Situation also analyzes trends in rural areas of the region’s countries between 2005 and 2014 with the aim of identifying if the improvements seen in this period for labor markets as a whole were also registered in these areas, and if the gaps with respect to urban areas narrowed.

The available data shows that rural areas did indeed benefit from the improvements in employment indicators related to quantity and quality seen in the regional total. Nevertheless, the urban-rural gaps did not shrink.

On this topic, the report concludes that in order to advance towards reducing the deficit of decent jobs in rural areas, greater modernization and productive diversification are indispensable, along with productivity improvements in the farming sector. In addition, the report recommends strengthening labor institutions to contribute to the formalization of rural employment, improved social protection, greater compliance with the minimum wage and other labor regulations, as well as to reduce the obstacles to labor insertion for women and youth from rural areas.