The Dominican Republic ranks among the leading job creation economies in Latin America during the first half of 2024, as per the Preliminary Overview of the Economies of Latin America and the Caribbean. The report, published biannually by the Economic Commission for Latin America and the Caribbean (ECLAC), shows that only a handful of countries in the region had robust and sustained employment growth.
The regional average stands at 1.7% – the lowest since the COVID-19 crisis. The Dominican Republic recorded employment growth of over 4% along with Bolivia and Chile.
The global employment growth recovery has been partial and uneven. While countries such as Brazil, Colombia, and Paraguay have shown marginal growth, it is slower than in previous years. Costa Rica and Peru reported contractions of over 1%, signaling a contraction in their labor markets.
Job Growth in the Dominican Republic: Sectoral Performance
Contrary to the regional slowdown, the Dominican Republic excelled in several high-impact sectors. Its success in job creation in Latin America can be attributed to strategic economic policies, sectoral growth initiatives, and a stable macroeconomic environment that fosters both domestic and foreign investment.
Industrial sector activity accelerates
Job growth in the industrial sector was particularly strong. Employment in the manufacturing and industrial sector expanded by 5% during the first half of 2024, putting the Dominican Republic at the top of the ranking, alongside Bolivia and Paraguay.
It is worth noting that the region suffered an economic slowdown in the manufacturing and industrial sector. Only the Dominican Republic and a few other countries have been able to accelerate the pace of employment.
The growth in manufacturing and industrial employment is due to several factors such as the promotion of export-oriented manufacturing, the development of free trade zones, public-private partnerships, and the expansion of value-added manufacturing and specialized industrial parks. In addition, increased investment in equipment, workforce training, and innovation has enabled companies to scale up production and remain competitive.
Construction surges
Job growth in the construction sector was another bright spot in the Dominican Republic. Employment in construction grew by more than 6% during the first half of the year, putting the country on par with Mexico, Brazil, Bolivia, and Nicaragua. Construction activity was boosted by monetary easing measures taken by the Central Bank of the Dominican Republic.
Interest rates were reduced, and access to credit improved, stimulating demand for residential and commercial construction, as well as large-scale infrastructure projects, such as highways, ports, and public buildings. Construction has a multiplier effect on the economy, as it drives demand for materials, boosts local consumption, and supports ancillary sectors such as transportation and manufacturing.
Services expansion
Job growth in the financial and business services was a testament to the formalization and strengthening of the Dominican economy. Employment in financial and business services expanded by more than 6%, positioning the Dominican Republic among the top six economies in Latin America.
The increase in employment in this sector is a sign of a maturing and more stable labor market that is shifting towards higher value-added activities. The growth of these services is driven by an increase in demand from new companies that want to formalize their businesses, as well as from international companies that are integrating with the local market.
Foreign direct investment in the financial sector, regulatory modernization, and digital transformation initiatives have created a more competitive environment. This has translated into an increased demand for skilled labor in finance and business support services, which tends to provide more stable and higher-paying jobs.
Basic services see double-digit expansion
The ECLAC report also registered growth in the Dominican Republic’s basic services sector, where employment increased by more than 10% between January and June 2024. The Dominican Republic was ranked alongside Argentina and Costa Rica in this pillar, which also includes electricity, gas, and water.
In 2023, the employment contraction in basic services was negative 8.8%. This recovery reflects strong growth in new employment opportunities, driven primarily by increased investment in energy infrastructure, renewable energy projects, and utility modernization.
The government-led initiatives in expanding rural electrification, as well as in upgrading water systems, have also generated thousands of jobs. This emphasis on utility modernization has positioned the country as a case study in job creation in Latin America, especially within essential service sectors.
Job growth outpaces regional peers
The Dominican Republic’s improved labor market performance is remarkable, given the overall regional employment dynamics. Latin America is grappling with complex economic headwinds, from inflationary pressures to fluctuating global demand, all of which weigh on job creation. In comparison, the Dominican Republic’s labor market data suggests a focused approach to generating employment and maintaining macroeconomic stability.
Job creation in the Dominican Republic rose by 1.57 percentage points in the first half of the year, the fastest in Latin America in 2024, against the regional average of 0.19 percentage points. Labor force participation also accelerated during the same period to the tune of 1.13 percentage points.
Compared to the labor force participation rate in Latin America of 0.43 percentage points, the Dominican Republic performed slightly better in this area. The low participation rate is an indication of how many adults in the country are not actively looking for work or are not available for work.
Labor participation stands for the total number of working-age people who are in the labor force, either employed or actively looking for a job. The low unemployment rate of the Dominican Republic is a testament to both the economy’s capacity to generate jobs and its citizens’ ability and eagerness to take them. The country’s continued rise in labor force engagement demonstrates how job creation in Latin America can benefit from clear policy direction and investment-friendly frameworks.
Low inflation target creates space for pro-growth measures
The Central Bank of the Dominican Republic had set a mid-point inflation target of 4% for the country in 2024, down from 4.5% in 2023. The low inflation target will continue to give the government room for maneuver in enacting other pro-growth measures.
Monetary easing to maintain competitiveness
Interest rates in the country have been declining since 2023. In 2023, it was cut to 8.38% in 2023 from 8.54% in 2022 and could come down further if the bank continues to ease monetary policy. The country will benefit from such interest rate cuts because the Dominican peso will become cheaper to use for business and purchases.
Reserves are expected to rise with lower government interest rates in the country. This will help banks and borrowers to invest more in the economy. The move is also likely to reduce the value of the peso, making imports and other services cheaper for consumers.
Conclusion
To conclude, the Dominican Republic’s robust employment growth is supported by activity in several major sectors, including the industrial and construction sectors. Its place as one of the leading economies for job creation in Latin America bodes well for the country as it is likely to attract investors that will, in turn raise the demand for the country’s labor.