Chile’s economic recovery is losing steam, with the jobless rate rising to new highs during the three-month period ending in August. According to data released by the government, the unemployment rate shot up to 6.7%, while factory output shrunk by 4.9% — well below market forecasts — in August in comparison with the same period last year.
Chile’s labor force numbered 8.36 million people during the three-month period, of whom 560,180 were unemployed.
The primary cause of the slowdown, according to analysts, is the decreasing investment in mining, although the financial services and tourism sectors also have shed a large number of jobs.
The sudden slowdown in mining activity has hurt consumer confidence, forcing banks to cut back on lending. Economists say the subdued consumer confidence may complicate President Michelle Bachelet’s plans to inject money into the economy and reverse the trend.
In the capital, Santiago, home to more than 40% of Chile’s workforce, unemployment rose to 7.2%. Here, the jobless rate has increased by 1.9% over the past year.
The only city where the unemployment rate is at a record low is Magallanes (3.3%), a growing industrial suburb in the south of the country. Bio Bio has the highest level of unemployment at 8.2%.
The sectors that have contributed to job growth include education, agriculture, livestock, hunting, logging and fisheries, according to the report.
In recent years, Chile has repeatedly cut interest rates in an attempt to encourage spending, but analysts say there is now little room for cutting the rates further.
Chile’s government and the central bank have forecast a gradual recovery beginning in the fourth quarter, but with demand for copper slowing down in the international market, it is unclear how Chile will be able to reverse its economic fortunes.