The urban unemployment rate in Latin America and the Caribbean fell to 6.4% in 2012 and is expected to continue its downward trend to drop to 6.2% in 2013, according to a new analysis from the International Labour Organisation. The level of unemployment is the lowest since the annual statistics were first compiled by the organisation in the early 1990s.
The unemployment rate in the region, which was at 11% in 2002, has kept dropping for a decade, except at the height of the global crisis in 2009. The drop in unemployment rates came amid continued economic growth, which averaged 3.1% with 3.8% forecast in 2013 in Latin America.
‘The drop in unemployment opens a window of opportunity; this is the moment to tackle the challenges of quality of jobs,’ said ILO regional director Elizabeth Tinoco. However, the report adds that about half the workers in the region are in the informal sector, which generally means low wages, minimal job security , little social security coverage and non-respect of labour rights.
In Latin America and the Caribbean, the financial crisis interrupted a strong economic cycle. During the pre-crisis years 1999 to 2007, average annual growth in both GDP and employment was positive and robust in a majority of countries. Over the period 2008 to 2011, both GDP and employment grew at fairly solid rates in a majority of countries, in spite of the economic contraction in some major economies in 2009. But in Central America, where economies are strongly connected to the North American market, the recovery was slower than in South America.
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Although Latin America was severely affected by the global economic crisis in 2009, it rebounded rapidly in 2010, supported by the recovery in commodity prices as well as the implementation of counter cyclical monetary and fiscal policies. ‘The latter was possible as the region enjoyed a healthy fiscal situation and had reduced external debt to manageable levels during the years of expansion,’ the report says. ‘What is striking is not only that the recession was short, but also that the recovery involved the creation of new jobs and led to a significant reduction in the unemployment rate, which fell from 10.3% in 2004 to 6.8% in 2011,’ it adds.
In Latin America and the Caribbean average real wages grew in all years between 2006 and 2011, in spite of the crisis in 2009. The lowest real wage growth occurred in 2008 as a result of a peak in inflation, reflecting increases in international prices of foodstuffs and oil. Overall, the report says that regional wage trends in Latin America are heavily influenced by large countries such as Brazil, where wage growth remained positive throughout the period.
Real wages contracted in 10 out of 14 countries in 2008, while in 2010 there were only six countries where this occurred. In both years, the majority of countries where real wages fell were in Central America and the Caribbean, as their economies are more dependent on the economic situation in the United States. Countries with high labour productivity growth also showed a substantial increase in real wages. So for example, average real wages grew at over 3% per annum in Brazil, Peru and Uruguay, and at over 2% per annum in Chile and Costa Rica.
In the overwhelming majority of these countries the unemployment rate declined, meaning that labour market indicators generally improved. Conversely, countries where GDP per capita grew only slowly during this period also saw only modest improvements, such as Mexico, or even reductions as in Nicaragua and El Salvador, in real wages.