Slowing economic growth may halt the falling unemployment rate in Latin America and the Caribbean (LAC), the Economic Commission for Latin America and the Caribbean (ECLAC) warns in its latest report.
Unemployment in the LAC region fell dramatically in 2013 and hit its lowest level in decades (6.2%). But the trend now appears to be reversing, with the region’s economies forecast to grow less then 3% this year.
The slowing growth will also complicate government policies regarding labor reforms. This is not “auspicious for the evolution of the regional labor market,” said the UN agency, which produced the report titled “The employment situation in Latin America and the Caribbean” in partnership with the International Labour Organization (ILO).
“Given the modest economic growth projected for the region in 2014 and current labor participation trends, a slow pace of employment creation is forecast, which means there will likely be no significant variations in the unemployment rate,” the report said.
Economist have expressed concern that an increase in unemployment may drag down the economies further as governments will have to dole out unemployment benefits to support their citizens.
The first signs of weakening economic growth emerged in late 2013 with labor demands cooling down in several larger economies including Brazil. In addition, salaried work grew at lower rates than in previous years, resulting in a slight decline in the employment rate.
According to the report, only 3.2% of adults are jobless, but unemployment is as high as 14% among young people.
“In 2014, the region’s countries must make efforts to advance in the creation of quality jobs and, more specifically, to promote the productive labor incorporation of youth,” the report suggested.
Today, the conditional cash transfer programs are benefiting 21% of the regional population, but the report suggested that governments must work towards strengthening social safety nets by introducing new welfare programs.
Nevertheless, the organizations warn that the transfer programs must be closely coordinated with comprehensive social protection systems and active labor market policies to ensure that “graduating” from these programs does not lead to a loss of rights for the families or to labor informality.