Latam Charts: The Jobs–Confidence Nexus  

• Employment recoveries are lagging rebounds in economic activity in most countries as labour-intensive service sectors are the last to re-open.

• Lifting employment levels and raising consumer confidence will be critical to ensuring domestic demand is able to sustain growth through 2022. 

JOBS, SENTIMENT, & DOMESTIC DEMAND

• As in most developed and emerging economies, Latam’s employment recoveries are lagging broader economy-wide rebounds in real activity. This disconnect stems broadly from the slower re-opening of relatively labour-intensive service sectors where physical distancing is either difficult or almost entirely antithetical to business models. 
• Amongst the Latam-6, only Brazil saw economic output in February exceed its year-ago levels, but Argentina, Chile, and Colombia were only 2–3% y/y off their February 2020 numbers (chart 1).
  

• In contrast, only Mexico, where pandemic-related restrictions were relatively limited compared to those in its regional peers, has seen employment come back to pre-pandemic numbers (chart 2). Of 12 mn jobs Mexico lost during 2020’s shutdowns, about 10.6 mn had been restored by March 2021. In the other Latam-6 countries employment levels remain down from their pre-pandemic norms by between 3% in Argentina and 14% in Peru.

• Consumer confidence has rebounded broadly in line with employment (chart 3), with Mexico leading the way despite one of the weaker growth outlooks in Latam (see our May 7 Latam Weekly for our latest forecasts). In contrast, recent political turmoil in Colombia and public-health restrictions in Chile have dampened sentiment despite rapid advances on vaccination delivery.

• Looking across major emerging markets, the relationship between employment and consumer confidence is weak, but positive (chart 4). Further progress in recouping jobs will be critical in lifting consumer sentiment and ensuring that Latam’s economic rebounds are sustained by ongoing recoveries in domestic demand—particularly as local emergency support and liquidity injections from central banks and pension drawdowns begin to wane.  

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