The harsh unemployment figure reached in February in Uruguay, 10.5%, the highest since 2007, suggests a complicated economic situation in the short term, when the report reflects the number of unemployed due to the COVID-19 crisis in the following months.
According to the National Statistics Institute (INE) of that country, the point estimate of 10.5% of the unemployment rate represents 2.1 percentage points more than the same month of the previous year (8.4%) and 2 percentage points difference from the estimated value in the previous month (8.5%).
Meanwhile, the estimate of the employment rate in the second month of the year stood at 56.4%, which represents 0.8 percentage points lower than in February 2019 (57.2%) and 1.1 percentage points of difference with the estimated value in the previous month (57.5%).
“DETERIORATION” PRIOR TO THE ARRIVAL OF COVID-19
With these figures, which are prior to the arrival of COVID-19 in Uruguay in March, the government of the center-right Luis Lacalle Pou (National Party) is preparing for figures that in a few months to come can become “a problem”.
This was detailed to Efe by the Minister of Labor and Social Security of that country, Pablo Mieres, who insisted that the unemployment situation is “seriously affected”.
“Let’s see how much the unemployment figure for March gives. I think it will grow a lot compared to the bulky figure for February, because if you have a large number of applications for unemployment insurance, beyond that 94-95 % are not due to dismissal, that does not mean that they are not converting. If this takes a long time to reactivate, it can become a problem for us, “he assured.
After knowing the figure for February, Mieres said that it is a situation that has been “growing and gradually deteriorating for several years”, in all variables, which, in his opinion, is “one more confirmation of the significant deterioration” he had employment before the crisis due to the health emergency.
“It was a huge storm on land that was already very affected. What we have before us is a situation of deep and acute crisis … I think it is one of the great challenges we have in the Ministry, “he said.
According to the INE, the point estimate of the activity rate in February stood at 63.0%, which represents 0.6 percentage points higher than the same period in 2019 (62.4%) and 0.2 percentage points of difference with the value calculated for the previous month (62.8%).
In that sense, Mieres highlighted that “there is no ideal number” of unemployment figures, although, for a long time, it was in the single digits and “it was very much celebrated” when it was possible to reduce these figures.
“We are talking about a very weakened situation and that is what falls later in March and the labor crisis continues at its best in April due to an acute issue that I hope that when the country returns to activity I would not say normal, but a little stronger will partially reverse, “he concluded.
BAD SHORT TERM EXPECTATION
The senior manager of the Department of Financial Economic Advice at the Deloitte Uruguay audit, Florencia Carriquiry, explained to Efe that when looking at the unemployment figures for February, it is a “typical seasonal behavior”, since, as she pointed out, December and January usually be months in which employment rises.
However, and in the same line as Mieres, he maintained that the data is prior to COVID-19, with which “it is expected that this will change dramatically” as of March, something that “is already being observed” with more than 100,000 applications for unemployment insurance.
“Starting in March we will be seeing a drastic deterioration in the labor market, additionally, unemployment will have an abrupt jump from March onwards with the crisis. Undoubtedly unemployment will rise several points. The deterioration of the market working in the short term is difficult to avoid, “he said.
Carriquiry highlighted the series of economic measures that the Government of Uruguay has taken during the health crisis, which, in his opinion, seek to mitigate the impact on household income.
Among the main economic measures of the Uruguayan Government to alleviate the health crisis and the increase in unemployment are lines of credit with flexible conditions, loans for small and medium-sized companies and deferment of payment deadlines from the General Tax Directorate and the Social Security Bank.
In turn, the special flexible unemployment insurance scheme was extended to all sectors of activity.