Don’t count Cepeda out yet
Election Day is finally upon us. You hear talk about presidential candidates and voting strategies everywhere, peppered with the latest polling results. As we approach the moment of truth – the first round of voting is on May 31 -- we are slightly more optimistic about the electoral outcome: Leftist Iván Cepeda seems to no longer be the clear leader. Is Cepeda really losing steam, or is President Gustavo Petro’s capacity to prop up Cepeda’s candidacy waning? We think the latter could be the case, and that the cause might be fiscal. Government spending, a key driver of recent GDP growth, might be losing steam in Q2. But don’t count Cepeda out yet. Both legacy and social media are open to putting in bold type whatever Petro wants to say in the runup to the run-off. He will surely try anything in his power to make sure the left will govern for the next four years. Is reduced government spending power and a fall in public optimism enough to put right-wing candidate Abelardo de la Espriella in the presidency? The jury is still out.
Watch for Cepeda’s numbers, and his first-round margin over de la Espriella. If Cepeda manages to win 43% or more of the vote, with 5+ points over his chief rival, that’s a sign that the left is very strong going into the run-off. The other indicator will be the first set of polls published after the first-round results. Then and there the election will start to be decided.
The government has enthusiastically celebrated recent labor market data, showing a March unemployment rate of 8.8%, the lowest reading in 26 years. Many argue that these are the best employment numbers in Colombian history. But the story seems much more nuanced; the results may even be somewhat worrisome.
In the 13 major urban areas of Colombia, unemployment fell by 1.1 percentage points over the past year, and almost four pp over July 2022 -- March 2026. But employed population growth has stalled over the last six months. So, why has unemployment continued to decline despite slow job creation? The answer lies in the fact that the labor force participation rate has flatlined at 66.6%, virtually unchanged from two years ago. With fewer people entering the labor market, the employment rate has also remained essentially flat at 60.9% over the past six months. So unemployment is not falling because of spectacular job creation and labor market dynamism.
Simultaneously, minimum wage increases have both outpaced inflation and overall wages, while the share of workers earning less than a minimum wage has increased dramatically. A similar trend is visible among self-employed workers earning below the minimum wage. In Colombia, labor formality is structurally tied to the minimum wage, since the threshold for contributing to the social security system is attached to it. Workers earning below the minimum wage are then, by definition, informal, and their numbers are growing.
So taken together, the labor market looks better on the surface than the reality underneath. Job growth has slowed considerably, especially in urban areas. The decline in unemployment owes more to people exiting the labor market than to job creation. Informality is increasing, driven in large part by minimum wage increases that have systematically outpaced both inflation and productivity growth, the cherry on top being the 23% hike following for 2026, a year of 6% inflation. A significant share of recent job creation has been concentrated in the public sector, an engine that will inevitably slow as the next government is forced to put the brakes on public spending.
Unless investment picks up and private sector-led growth replaces public spending as the primary driver of the economy, the current trajectory is unsustainable. On a more upbeat note, construction job growth is a positive sign for a sector that has been mostly moribund for the past four years.
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