Observations on the Descent of Colombian Unemployment in the Next Years.

The unemployment rate in the country was 12% in 2.009 and fell to the desired one digit target in 2.013 when it registered 9.6%. From that year the country maintained until last year, by 9.7%, the goal achieved. In those 5 years the lowest rate was reached in 2.015 with 8.9%.

In the present year only in one month (june with 9.4%) presented a digit, in the other month’s records greater than 10%. In august, the last available figure was 10.8% higher than the same month of the previous year of 9.2%.

The country departed from the downward trend in the unemployment rate that it showed until 2.015 and was far from matching the Latin American average of 6% that maintained the region until two years ago. Currently, Colombia with a record of 10 or 10.2% by the end of the year, will exceed the average of the region that will be 8% according to International Institutions.

Colombia, as national experts say, is growing (measured by GDP) in recent years below its potential level that is 3% to 3.5%. Indeed, in 2016, 2%, in 2017, 1.4% which is the lowest record in recent years and in 2018, 2.7%. In this year, growth rose to 3% in the first half of the year, which was higher than 2.5% in the previous year. Research entities and official sources expect at the end of the year a figure between 3.2% and 3.5%, matching the range of potential growth of the country as mentioned before and above that of Latin America, as it has been in previous years and that projects close to 1%.

It is also expected that for next year the GDP will grow to 3.5% or 3.8% and it would be another year of equalization to the potential growth and possibly between that year and the next one of the positive reaction of the unemployment rate will begin to fall from levels that may be close to 11%. At that time the industry, commerce and agriculture sectors that participate with most of the jobs, will have reacted and will start the creation of new jobs since between 2.018 and 2.019 other sectors are the creators of jobs that are not enough to compensate the negativity of the first mentioned.

The downward unemployment behavior, explained earlier, which will start sometime in the next two years, could accelerate and obtain greater reductions, with the competitiveness pact signed with the private sector, which should be monitored, implementing goals and evaluations periodic job creation, productivity and exports and corrective when necessary. Keep in mind that companies were reduced income tax from 33% to 30% with the financing law.

There are also other proposals such as the following. The consolidation of study tables on a labor reform to make the market more flexible, including part time work, to facilitate hiring and lower informality. There are studies that indicate that the general reduction in payroll costs could generate new jobs and incorporate workers into the formality. Reduce the workday, go from 48 hours a week, to 45, trying to lower one hour per year, until the year 2.022. A rural integral salary, with which, the employee would have a greater disposable income, but he would have to take care of all the costs of his social security.

Another factor to take into account and at the time of the last quarter of the year, is the minimum wage. There are several studies showing that increases in the minimum wage above inflation plus productivity produce more unemployment and informality. The same goes for extra premiums, which benefit those who receive them, but make hiring more expensive and encourage unemployment.

Returning to the one digit unemployment rate, achieved over 5 years, as mentioned at the beginning of this note, is a social imperative and achieving equalization of the Latin American average an economic challenge for a country with economic growth greater than that of the region.

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Today, in terms of world markets, stock exchanges behave mixed, due to factors such as uncertainty about the global economic slowdown and persistent disagreements between the United States and China over trade.

The price of oil continues to fall due to inventory data in the United States known yesterday higher than expected and the discouraging information on industrial production in Europe. The WTI 52.6 dollars per barrel (-0.1% daily) and the BRENT 57.6 dollars per barrel (-2.2% daily).

In Colombia, the peso opens the day with appreciation at 3.484 per dollar against the TRM for today of 3.497.