The country remains mired in a situation of low growth and high inflation, even with contention of important administered prices and a current account deficit of US$ 80 billion over the preceding 12 months. In parallel, there are contrary signs from the labor market: unemployment continues to be low, although with some signs of creeping upward in recent months, but labor income is still growing in real terms.
We have reiterated in recent reports that looking only at the unemployment rate, and especially the job numbers for the six metropolitan regions (or four in the latest reading due to the partial strike of IBGE employees) does not give a true picture of the profound changes the country’s job market has been experiencing. The data from the most recent National Household Survey (PNAD) are very welcome to help clarify the matter: they destroy some myths that had found resonance in the market and confirm various hypotheses we have formulated in recent months. The survey figures show that unemployment has increased, from the previous level of 6.2% to 6.5% in the latest reading, although tis is still low by historical standards. Furthermore, the regional dispersion of unemployment has increased, as shown below. At the same time, although real payroll is still growing, it has been decelerating, falling from annual growth of 7.7% in 2012 to 6% in 2013. This growth is still strong when considering the deceleration of the economy.
But the most important point was confirmation of the sharp decline in the participation rate, mainly among workers who earn up to two times the minimum monthly wage (who represent 60% of employees). This is the main factor explaining the abnormally low jobless rate. In other words, the number of people not entering – or leaving – the labor market is increasing, reducing expansion of the labor supply. For this reason, the slower job creation due to the decelerating economic growth has not translated into an increase in unemployment. There are, however, signs that this picture is changing. The short-run indicators suggest that the situation of the labor market has been worsening in 2014, a trend that will likely continue in the coming months.
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