The jump in unemployment, the other bad news of the recession

The recession that sank economic activity in the first quarter impacts real income and activity, but also already makes itself felt about employment. The data that is beginning to emerge shows that since last December they were unsubscribed 275,000 salary accounts.

The worst part is the construction. With public works paralyzed and a significant retraction at the private level, they lost 57,382 jobs registered in five months and sources in the sector assure that the fall was also felt in the informal sector.

In the public sector in just four months, between layoffs and voluntary retirements, 11,534 positions, 3.5% of the total.

According to data from the Ministry of Labor, Employment and Social Security of the Nation from the inauguration of Javier Milei until February – latest official data – they were lost 62,920 jobs.

For March, the Labor Indicators Survey (EIL), which surveys employment in 3,500 companies, estimates a drop in others 34,000 positions. With activity still falling, analysts see little chance of this trend changing in the coming months.. And they anticipate that unemployment could be around 9% at the end of the year, a marked jump from 5.7% in the last quarter of last year..

“The recovery of employment will be slow,” defines Lorenzo Sigaut Gravina, chief economist at Equilibra. “This year we are not going to see strong employment growth”he insists. So far this year, activity has been reduced in sectors with high demand for personnel, such as industry, construction and commerce, although there are other sectors such as mining, hydrocarbons and agriculture that are on the rise.

“The sectors that are now driving activity do not generate much employment. What is needed is for the recovery of activity to be widespread. We already know that there will not be a V-shaped recovery, we do not yet know if it will be U-shaped or another slow shape. Maybe at the end of the year there could be some recovery on the margin, but I see everything limited. It is difficult to know what the evolution of the labor market will be, but “It is not unlikely that in the fourth quarter unemployment will approach 8.5% or 9%,” says Sigaut Gravina.

From Equilibra they also point out that in the salaried jobs the substitution effect: many workers became self-employed or informal. “In any case we estimate a stagnation in informal jobs and a drop in non-salaried jobs of 1.3% month-on-month.”

“We believe that unemployment will indeed tend to deepen in the coming months and We estimate that it may reach around 10% by the end of the year“, agrees Rocío Bisang, economist at EcoGo.

“To the extent that wages, consumption and activity do not begin to recover, we see it as difficult for employment to return to previous levels, which were also particularly low,” says Bisang.

“We are estimating that Only at the end of the year or the beginning of next year could the trend begin to reversealthough it would remain above the values ​​recorded at the end of 2023 for a long time,” reinforces the economist.

“Beyond unemployment itself, I think that something relevant to follow will also be the “quality” of employment. In that sense it is likely that we will see not only an increase in unemployment but also certain transfer from formal to informal employment and monotax”points out.

The employment crisis is being felt not only in the drop in jobs but also in other formats. “The industry was the hardest hit by the recession and as it was protected with high levels of stock, What we are seeing are much more suspensions than layoffs. In traditional activities, suspensions give us the signal that companies They have an expectation of recovery”says Natacha Izquierdo, from the consulting firm Abeceb.

For Left, “The job losses linked to the recession are less than expected. Our projection is that unemployment will rise to 6.9%, with a migration of formality and informality and a high level of activity suspensions.” And he adds that “when the economy grows again and construction is reactivated again “We see chances of that number going down.”.

Juan Manuel Ottaviano, economist at Fundar, suggests that “we must be cautious until we know the INDEC data that will be published next month. But it is likely that if registered salaried employment fell by 1 point in two months, informal employment has had an even greater fall. It is likely that in April, May and March it fell with the same trend, that is why we could make an estimate of. a drop of almost two points in registered and an even greater one in the informal”.

The role of labor reform

The jump in unemployment coincides with the debate over the labor reform that the government is trying to implement. For Izquierdo, it is key to move forward with these changes.

“So that genuine employment is generated again there must be structural reforms because what exists until now has increased informal employment,” he says. And he affirms that in ten years formal employment has not grown. “Where this problem hits the hardest is in SMEs that do not have the flexibility of large ones, which is why labor reform is fundamental.”

The opinions are not unanimous. “With the labor reform the only thing that would be achieved is that this block of ice that hits the activity moves towards employment“concludes Ottaviano. He emphasizes that “employment accompanies activity and not the other way around, therefore a recovery in employment could be observed only after the recovery of activity.”

For this economist, “this employment crisis is very deep. It can be deeper than the pandemic, especially if it lasts for a long time, which would lead to a double-digit vacancy rate for this model and above.“.