Kast’s Chile Sinks Into Joblessness
José Antonio Kast entered La Moneda promising that a more business-friendly state would revive investment and employment. Six months into his presidency, Chile's official unemployment rate is 9.6%.
The June-August figure is one percentage point higher than a year earlier. The number of employed people fell 0.9% while the unemployed population rose 13%. The combined rate of unemployment and involuntary part-time work reached 16.2%. These are not abstract confidence indicators; they describe a labor market in which more people are looking for work and fewer are finding it.
August's headline activity data added to the pressure. The central bank's Imacec fell 1.0% from a year earlier and 0.7% from July on a seasonally adjusted basis. Mining was the main drag, collapsing 17.4%, while non-mining activity still grew 1.4% year-on-year. That distinction matters, but it does not erase the employment problem: the deterioration in jobs is broader than one bad month for copper.
Kast's original economic package centered on lower business costs, deregulation and a gradual cut in the corporate tax rate from 27% to 23%. The theory was familiar: create a friendlier environment for capital, unlock investment and let stronger private activity pull employment with it.
By late September, the government was reaching for a different set of tools. Its Chile Despega plan mobilizes 1.3 trillion pesos and aims to generate more than 100,000 jobs through accelerated public works, hiring subsidies, financing and state-backed measures to push activity forward.
That is a revealing turn. A government elected on the promise that deregulation and tax relief would release private-sector dynamism is now leaning on public investment and employment subsidies to confront the labor weakness that remains.
There is nothing mysterious about the political choice underneath it. The administration moved early on structural reforms designed to lower corporate taxation and speed permits. When employment failed to respond quickly enough, the state was summoned back in to subsidize hiring, accelerate infrastructure and provide liquidity.
Kast inherited a labor market with longstanding weaknesses, but he also made employment revival one of the central tests of his program. The latest data therefore belong on the government's ledger: 9.6% unemployment, fewer employed people than a year earlier and a job-creation plan large enough to signal that the promised private-sector acceleration has not arrived on schedule.
The argument for Kast's model was that a leaner, more investment-friendly state would create a stronger labor market. Chile is now getting the investment-friendly reforms and the emergency employment program at the same time. That contradiction is becoming one of the clearest economic facts of his young presidency.
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