October 20, 2014
Job creation freezes as crisis bites
Auto sector crisis drives decrease from first quarter of 2014, says Labour Ministry
Registered private sector employment dropped 0.3 percent in the second quarter compared to the first three months of the year, but companies were able to employ 0.5 percent more people between May and June than during the same period of 2013, a Labour Ministry report indicated yesterday.
Surveying 2,300 firms in the eight largest urban hubs of the country and accounting for 67 percent of registered private employment, the EIL report confirmed the first quarterly drop since the second quarter of 2013.
Perhaps more concerning in terms of what’s ahead for the rest of 2014 was the hike in suspensions, up from 3.7 percent in the first quarter to 5.8 percent in the second, and also up 1.2 percent on the same quarter of 2013.
According to the ministry, suspensions affected six out of every 1,000 registered private sector workers over the three months.
These largely came in the auto sector, with car manufacturing output suffering another month of depletion in June, falling 19.8 percent on the same month of 2013, according to the ADEFA auto factories’ chamber. The sector brought the curtain down on a crisis-riddled semester with a 21.8 percent contraction and thousands of suspensions.
Nonetheless, the government department led by Carlos Tomada said in the report that “the drop in the number of formal job positions is not due to an increase in suspensions or layoffs in particular, rather it was the result of a pronounced contraction in the volume of incorporations of workers (hiring).”
In other words, companies did not take on new employees and people did not quit their jobs, with the latter arguably resulting from the uncertainty of securing new employment.
“From the first quarter of 2014, we have seen a declining trend both in the entry and exit to and from (companies),” the report stated.
The rate of sackings, layoffs and suspensions as a percentage of total employment clocked in at 0.7 percent during the second quarter, the same as during the same quarter of 2013 and “inferior to that observed between 2008 and 2012.”
Over the last four year, the peak rate of “incorporation” by firms was seen in the first quarter of 2011, while last quarter’s rate of under 2.2 was the lowest for the mentioned period.
The four-year high for people deciding to leave, being suspended or laid off came in the first quarter of 2012 at 3.1, while again, last quarter’s rate of under 2.2 percent was a four-year low.
The monthly EMAE economic activity index, which is a close proxy for gross domestic product (GDP), plunged for the third consecutive month in May, INDEC reported in July, seemingly confirming that the country had entered recession after the January devaluation of near 15 percent.
A decline in industrial output and weakness in consumption is seen to be hurting the economy, and the July 31 default could further aggravate job creation.
Although seemingly resolved through the renewal of a trade pact with Brazil and the unveiling of the Procreauto credit scheme for car purchases, the abrupt and sharp decline of the auto sector both in terms of production, domestic sales and exports was reflected in the contracting EMAEs of May, March and April.
Formal increments in employment in the construction (0.7 percent), communal, personal and social services (1.4 percent) were outweighed by drops in most other activities. Industrial positions were 1.1 percent fewer, there were 1.6 percent fewer jobs in retail, restaurants and hotels, while the transport, storage and communications sectors’ workforces shrunk 0.6 percent. Financial firms and business consultancies had 0.2 percent fewer employees than during the January-March period.
Decreases were registered in seven out of the eight urban centres surveyed, with the outlier being the Greater Resistencia area of Chaco, where employment rose by 2.4 percent on the first quarter of the year.
Greater Buenos Aires saw a 0.7 percent quarterly drop, Greater Córdoba one of 0.7 percent, Greater Rosario 1.5 percent, Greater Mendoza one percent, Greater Tucumán 0.8 percent, Greater Santa Fe 0.9 percent and Greater Paraná 0.1 percent.
When looking at the inter-annual comparison, the majority of businesses have been able to expand, with the exception of construction, retail, hotels and restaurants. The construction sector saw a year-on-year decrease of 4.6 percent during the second quarter, while retail, hotels and restaurants’ shrunk by 0.3 percent.
Leading the overall growth in the second quarter last year was Greater Buenos Aires, which expanded by 0.8 percent, Greater Córdoba by 0.4 percent and Greater Santa Fe, by 1.7 percent. Greater Tucumán and Greater Paraná registered no changes, while Greater Rosario, Greater Mendoza and Greater Resistencia registered drops of 1.2, 2.4 and 0.8 percent, respectively.