Chile's Jobs Market Defies Slowdown to Hit Two-Year Low

  • Manufacturing production shrank 2.8% from the year earlier
  • Unemployment fell more than forecast to 5.8% in fourth quarter

Chile’s unemployment rate fell to a two-year low, defying a slowdown in the economy that saw manufacturing output contract for a third straight month in December and retail sales growth weaken.

The jobless rate slid to 5.8 percent in the fourth quarter from 6.1 percent in the month earlier period, the National Statistics Institute said on its website Friday. The median estimate of 21 analysts surveyed by Bloomberg was for unemployment to drop to 6 percent. The jobless rate has now fallen more than forecast in each of the past five months.

“What is surprising is that job creation keeps rising,” said Cesar Guzman, an economist at Banco Security. “The outlook for 2016 is still pointing to a moderation in employment.”

The number of people in work rose 1.5 percent from the year earlier, even as manufacturing contracted 2.8 percent in December, the National Statistics Institute said. That compared with the median estimate of 18 analysts surveyed by Bloomberg for a drop of 2 percent. Industrial production fell 3.3 percent over the same period, while retail sales rose 1.9 percent.

Finance Minister Rodrigo Vales says investment and jobs are transferring from the mining industry to forestry companies, wine producers and import substitution firms as copper prices fall and the peso tumbles against the dollar. The transition won’t be quick though as companies take time to adjust investment plans and workers learn new skills. In the meantime, slower growth is easing pressure on inflation, central bank board member Mario Marcel says.

“We have to be aware of the fact that with a weaker economy, inflationary pressures are lower,” Marcel told Diario Financiero on Thursday.

The central bank has raised interest rates twice since October with inflation above the target range in 18 of the past 21 months. Consumer prices rose 4.4 percent in December from the year earlier, compared with the 2 percent to 4 percent target range. The key rate is currently 3.5 percent.

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