High Unemployment Persists.  On 19 July, the Labour Ministry reported that unemployment rose to 15.4% of the economically active population in May, up from 13.8% in October 1999.  The May reading was virtually in line with market expectations of 15.5%.  According to the Labour Ministry an additional 250,000 Argentines have joined the ranks of the unemployed.  The new unemployment figure brings the number of total unemployed to 2.1 million and is the highest rate since May 1997 when unemployment was 16.1%.  The brunt of the unemployment increase was experienced in the interior provinces of Argentina.  Particularly hard hit were Gran Rosario in Santa Fe province and Tucuman province where unemployment rose from 17.6% and 17.1% in October of last year to 20% and 18% respectively in May.  

In general, the increase in unemployment was brought about by investment cutbacks and factory closures, which were induced by the slower than expected pickup of the Argentine economy.  Furthermore, the current hike in unemployment clearly reflects that the Argentine economy is still not set on a clear path to economic recovery from last year's recession.  The government believes that increased labour market flexibility provided by the new labour law, approved in April, will help improve employment conditions.  In addition, the Infrastructure and Housing Ministry has announced that the government hopes to adopt a multi-year US$ 20 billion public works programme (still subject to Congressional approval) intended to generate some 1,000,000 jobs through a combination of public and private sector initiatives.  The programme will be targeted specifically at transportation, bridge, water and flood prevention projects and will give preference to national firms in bidding procedures.  In the immediate future, the Ministry plans to construct 100,000 new homes in the coming year intended for the lower- and lower-middle income sectors.

Growth not resuming sufficiently.  The current employment spike reflects continued slump in labour-intensive sectors, particularly the construction industry, which has been contracting since September 1998.  According to the National Statistical Institute (INDEC), the National Construction Activity Index (ISAC) dropped 19.4% in June over the same month in 1999 on a seasonally adjusted basis.  Key to the continued construction sector downturn is the scarcity of new public sector projects as the government's fiscal stringency has prompted the postponing of numerous infrastructure projects.  Private sector projects remain constrained by tight credit conditions and a lack of an upturn in housing demand.  

Moreover, despite the export sector's improved performance a healthy recuperation in industry remains absent -- seasonally adjusted industrial production was up 0.8% in June over the same month last year.  The industrial sector has been affected by both adverse weather conditions as well as the low demand from the construction industry.  Businesses surveyed in INDEC's May industrial report still lack confidence in the economic rebound.  Nearly two-thirds of the surveyed businesses claimed that they either expected domestic demand to remain at current levels or to decline, compared to 34.3% who anticipate a pick up.

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