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Salaries fall in the Algarve, whilst Greater Lisbon bubble still holds

lisbon bubbleThe Portuguese labour market is sending mixed signals. The total unemployment rate fell to 6.1% of the working population in the third quarter of this year, the lowest it’s been in 16 years. The youth unemployment rate also eased down slightly to 17.9%, according to data revealed by National Statistics Institute (INE) on Wednesday.

But at what price does this happen? There are already regions of the country, mainly the Algarve and the Alentejo, which have suffered reductions in their average wages in the three month period between July and September, which are usually characterized by the resurgence of summer jobs linked to a greater flow of tourism.

According to INE, employment continues to evolve in a positive manner, but less strongly than in the recent years, and increases in net wages paid to employees are becoming more thinly spread.

There are currently more than 4.9 million people working, following a 0.9% increase in employment in the third quarter of the year. This may appear to be good, but it is the weakest growth since mid-2016, and employment increases have been slowing for seven straight quarters.

Furthermore, the national average hides regional realities, some more negative than others. For example, average wage income effectively began to fall in two regions of the country. In the centre, a region that employs over 1.1 million people, the average wage fell by 0.5% (to 846 euros), which was not the case two and a half years ago.

The Algarve, where 220,000 people work, has also begun to suffer from wage compression. According to INE, the average net salary of employees living in the region fell by 0.1% year-on-year in the third quarter (to EUR 836 per month), after a contraction of 0.8% in the second quarter. This is worrying, as the Algarve has not experienced wage devaluations since mid-2016.

In the meantime, salaries have continued to evolve above the national average in places such as Lisbon and Porto. The disaggregated data indicates that the northern region (with 1.7 million workers) had the largest increase in average wages (up 3.3% to 854 euros in the third quarter), followed by Greater Lisbon, where the average wage was up by 3.1% (up to 1064 euros per month). The metropolitan area of ​​the capital currently has 1.3 million workers.

This data indicates that there is a disproportionate salary distribution throughout the country, with a focused bubble of above-average salaries in Lisbon and Porto to match the higher lifestyle costs.

The employment survey released on Thursday by INE also hows that while job creation is weakening, there are signs that reinforce the idea that precariousness may not be worsening. The year-on-year rise in employment was mainly explained by the 3.1% increase in the number of permanent contracts, which now cover almost 3.3 million people.

Short-term employment fell 6.4% to 712.3 thousand cases. Part-time work fell by almost 3% to 490.3 thousand people. By contrast, more people are again stuck in unemployment longer, which is a very serious social and economic problem as it hinders economic growth in a self-damaging cycle.

The INE data warns that more than half of unemployed individuals (52.4%) have been looking for a job for a year or more, and that there are now 169,300 "long-term" unemployed people.

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