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Brazil Creates Fewer Jobs Than Expected as Growth Slows

Nov. 18 (Bloomberg) -- Brazil’s economy created fewer jobs than economists expected in October, cementing expectations that the central bank will continue to cut borrowing costs to shore up growth.

Latin America’s biggest economy generated 126,143 government-registered jobs, less than the 167,718 expected according to the median estimate in a Bloomberg survey of 12 economists. Companies expanded payrolls in October at the slowest pace for the month since the $2.1 trillion economy stalled in the wake of Lehman Brothers Holdings Co.’s collapse in 2008. In September, the country created 209,078 jobs.

Traders are wagering the central bank will cut borrowing costs this month by half a percentage point to 11 percent as President Dilma Rousseff seeks to prevent spillover from the euro debt crisis from plunging Brazil into recession, interest rate futures show. The government may step up measures to boost credit as part of a plan to fuel growth, said Ures Folchini, head of fixed income at Banco WestLB do Brasil.

“We clearly felt the international crisis,” Labor Minister Carlos Lupi told reporters today in Brasilia. Sao Paulo, the country’s industrial hub, was the most-affected, he added.

Yields on interest rate futures maturing in January 2013, the most-traded in Sao Paulo, erased early gains after the job report was published and was unchanged at 9.93 percent as of 8:30 a.m. New York time.

Interest Rate Cuts

Policy makers reduced the overnight benchmark interest rate by half a point in their past two meetings and last week loosened restrictions on consumer lending put in place over the past year to prevent the formation of a credit bubble.

The government today lowered its forecast for economic growth in 2011 to 3.8 percent from 4.5 percent, according to its bi-monthly budget report sent to Congress. That’s still more than the 3.16 percent analysts are forecasting in the most-recent central bank survey published this week.

Government-registered job creation number is a balance of posts created minus job eliminated. Registered jobs, so-called formal work, assure employees a range of benefits such as unemployment insurance, bonuses and retirement payments by the government.

To contact the reporter on this story: Arnaldo Galvao in Brasilia Newsroom at agalvao1@bloomberg.net; Andre Soliani in Brasilia Newsroom at asoliani@bloomberg.net

To contact the editor responsible for this story: Harry Maurer at hmaurer@bloomberg.net

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