Unemployment Declines Despite Tepid Growth in Brazil

Brazil Unemployment Decreases
Brazil Unemployment Decreases
Brazil Data Talk: Brazil’s unemployment levels continue to be at historical lows despite relatively weak growth. While real Gross Domestic Product (GDP) rose by 1.38% year on year during the fourth quarter of 2012, the unemployment rate declined to a low of 4.6% in December 2012 owing to the traditionally busy seasonal period when the demand for temporary jobs tends to increase. The number of registered employees in the private sector, which previously demonstrated positive growth rates, continued to increase by 3.6% year on year in December despite the relatively low economic growth rate. Overall, the average unemployment rate for 2012 stood at 5.5%, an unprecedented low. Brazil’s employment rate has remained strong across most sectors, though there have been some outliers. Of note, employment in Quarrying, Manufacturing and Production & Distribution of Electricity, Gas and Water remained stable in December 2012, with 3.66 million persons employed – approximately the same as the number of workers employed in December 2011. On the other hand, employment in the Personal Services sector declined by 2.8% year on year during December 2012, its fifth consecutive decline since August 2012. However, employment in most other sectors grew, including the Construction sector, which expanded by 4.1%; Commerce, Automotive Repairs, Personal & Household Goods sector by 6.2%; Finance, Real Estate Activities, Rents and Services sector by 0.3%; Public Administration, Defence, Social Security, Education, Health & Social Services sector by 6.0% and Other Services by 4.6%, all in year on year terms. The official figures from the Formal Employment index lend further support to show that employment in the Service and Commerce sectors remained strong despite the poor GDP growth rate, increasing by 3.2% and 3.3%, respectively. Conversely, growth in the employment index of manufacturing-related employment declined by 1.51%, though employment in the manufacturing of chemicals & pharmaceuticals products as well as food products & beverages increased by 1.5% and 1.2% respectively during December 2012. Brazil Unemployment Decreases In addition to improvements in overall employment, monthly real wages also increased by 3.18% year on year to BRL 1,829.55 monthly in December 2012, corresponding to 23.44 million employed workers; monthly real wages averaged BRL 1,810.67 during the 2012 calendar year, a rise of 4.1% compared to 2011. Overall earnings increased 6.6% in 2012, to BRL 42.906 billion. According to the Brazilian statistical provider, IBGE, the main reason for the growth in employment income is the increase in the minimum wage, especially for domestic workers and those employed in the construction industry, which are especially sensitive to such variations. Together, the increase in average income and the decline in the unemployment rate suggest a potential increase in labour demand in anticipation of expected growth in several sectors. The Services and Commerce sectors saw their respective GDP contributions increase by 1.7% and 1.0% year on year, respectively, in part owing to the labour intensive nature of these sectors. At the same time, some commentators have remarked that the relatively low unemployment rates may mask under-utilisation of the labour force as employers seek to reduce retrenchment expenses by providing mandatory vacations instead. Average earnings are expected to grow further in 2013, albeit at a slower pace as the labour market becomes saturated. At the same time, the lack of qualified workers may bring down average income levels in the long run. On a more macro level, lower increases in minimum wage levels (due to employer pressure) and higher inflation may erode overall real income during the coming months. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Bruno Vasconcelos - CEIC Analyst Back to Blog
4th April 2013 Unemployment Declines Despite Tepid Growth in Brazil

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