Unemployment grows in Argentina, with an economy in strong contraction

The unemployment rate in Argentina rose in the first quarter of the year to its highest level since 2021, with a labor market strongly affected by the contraction of economic activity and the severe fiscal adjustment undertaken by the Government of Javier Milei.

As reported this Monday by the National Institute of Statistics and Censuses (Indec), unemployment stood at 7.7% in the first quarter, with an increase of two percentage points compared to the fourth quarter of 2023 and 0.8 points in interannual terms.

The level of unemployment in the first quarter represents a change in cycle after having reached 5.7% in the third and fourth quarters of 2023, the lowest rate since 2016.

The increase is not surprising since the first quarter ended with a year-on-year drop in gross domestic product (GDP) of 5.1%, also according to official data released this Monday.

This contraction in most sectors of economic activity has occurred in a context of strong fiscal adjustment, high inflation (51.6% accumulated in the first quarter), loss of purchasing power of salaries and collapse in demand .

In this context, the loss of jobs was recorded in both the public and private sectors, both in the formal and informal markets, and even affected self-employed workers.

Milei’s fiscal ‘shock’ plan has led to a wave of layoffs in the State and, in addition, a paralysis of public works that had a full impact on the construction sector, where, according to official data, 28,000 jobs were lost. work in the first quarter.

But the adjustment and collapse of the economy also negatively affected the labor dynamics of industry and commerce.

According to the data of the Indecthe number of unemployed in the 31 largest urban conglomerates in Argentina considered in the official measurement grew in the first quarter to 1,088,000 people, about 266,000 more than in the fourth quarter of 2023.

Between January and March, formal salaried jobs fell by 100,000, to 6.3 million, while salaried but informal jobs also fell by 100,000, to 3.5 million, which, in a worrying and persistent manner, represent 35.7% of employees in Argentina.

Meanwhile, self-employed workers went from 3.5 million in the fourth quarter of 2023 to 3.3 million in the first quarter of 2024.

The official report also reveals an increase in the rate of employed people looking for another job, which rose to 16% in the first quarter, to 2.2 million people, a figure that hides dissatisfaction with the income received or the need to add a second job. .

According to experts, this phenomenon is explained by the strong loss of household purchasing power, with salaries that accumulated an average increase of 45.5% in the first quarter, below the 51.6% accumulated in the price index.

Other public and private reports agree on the trend of job destruction in the first quarter.

The official records of the Ministry of Labor show 122,900 registered jobs (public and private) lost in the first quarter.

For their part, private consulting companies indicate that 165,000 jobs have been lost in the first quarter, of which 96,000 were lost in the public sector and 69,000 in the private sector.

Another striking fact is that 274,311 bank accounts stopped crediting the payment of salaries during the quarter in Argentina, where it is mandatory for the employer to deposit the salary paid into the worker’s bank account.

The private economists that the Central Bank consults month after month for its expectations report project that the unemployment rate will close 2024 with an index of 7.5%, while the GDP would contract by 3.8%.