Andrés Lerner 
Recession is looming in Argentina. Since April, the economy has shown no signs of recovery, and the drop in consumption and production has already spilled over into the labor market.
Suspensions are multiplying and conflicts are intensifying. According to official data, June saw the highest number of layoffs in the last nine years. The Argentine Industrial Union has already warned that the situation worsened in July, while banks are warning of rising numbers of bounced checks. The dollar, hovering near the upper limit of the exchange band, threatens to deal another blow to purchasing power.
Since April, the economy has failed to post any month-on-month growth — and April’s rebound came only after a very weak March, which had already fallen 1.8% from February amid expectations of a shift in the exchange rate regime. By the end of 2025, the government may celebrate growth of around 3%, but it will be little more than a statistical carryover.
In practice, sales, production, and access to credit have come to a standstill. In recent days, complaints have surfaced from the Argentine Construction Chamber, the Santa Fe Industrial Federation, Fundación Mediterránea, and even some quiet grumbling from the financial sector.
Last week, the Herald’s sister title, Ámbito, reported the first cracks appearing in payment chains, especially in sectors with longer supply chains. Speaking on the podcast La Fábrica, Banco Macro president Jorge Brito said the number of bounced checks doubled between June and July, and the trend continued in August. He called it an amber warning for the sector.
Argentine employment in crisis
The production and demand slump triggered by the monetary squeeze is hitting the labor market. According to data released last week by the Labor Secretariat, layoffs increased in June compared to the previous month, rose year-on-year, and reached their highest level in the last nine years.
That data already seems outdated. Just last week, a porcelain tile factory in Pilar and a motorcycle plant in Campana shut down, layoffs hit the dairy company La Suipachense, more cuts are expected at tire plants, and conflicts worsened across the metalworking and petrochemical industries.
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Luis Campos, a researcher at the CTA trade union federation’s Institute of Studies and Training, told Ámbito that “almost all sectors” contracted in June and “everything indicates that this trend may have deepened in the third quarter, with further deterioration in the formal labor market.”
In July, nearly 25% of companies cut staff, according to the Argentine Industrial Union’s latest report — the highest figure in the entire data series. Campos explains that the destruction of formal jobs is being partially offset by a rise in self-employment, which is why unemployment figures are not yet climbing. But working conditions are deteriorating: on ride-hailing platforms, the number of drivers is growing, demand is falling, and fares have not increased in a year — an equation that increasingly fails to add up.
A soaring dollar
The dollar is nearing the ceiling of the exchange band and threatens to erode wages’ purchasing power once again. On Friday, sell orders for about US$300 million appeared around AR$1,472 per dollar. The market suspects the Central Bank intervened, burning through reserves, more than a month ahead of the October midterm elections. Most of those reserves are effectively “borrowed” from the International Monetary Fund.
The downward slide in activity and employment not only raises doubts about the ruling coalition’s electoral prospects in October, but also challenges the notion that austerity enjoys broad popular support — an argument the IMF has used to justify increasing its exposure to Argentine risk. The heavy defeat in Buenos Aires province was an early warning sign.
According to Campos, this economic plan only worked under conditions of recession and declining formal employment, and the key question was whether the government could maintain social legitimacy long enough to carry it through.
“Being extremely optimistic, employment might hold at current levels, but everything will depend on the new economic program, because it’s becoming quite clear that the current one will not continue,” he said.