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Brazil November Jobless Rate Declines to Second-Lowest Ever

Brazil’s unemployment rate dropped to its second-lowest level since the series began in 2002, creating additional inflationary pressure in the world’s second-biggest emerging economy.

Unemployment fell to 4.9 percent from 5.3 percent in October, the national statistics agency said in Rio de Janeiro today. The decline was steeper than predicted by all but two of 33 economists surveyed by Bloomberg, whose median estimate was for unemployment to fall to 5.1 percent.

As Latin America’s largest economy heads for its second-worst performance in 13 years, unemployment has remained near historic lows throughout 2012, pressuring inflation that has run above the central bank’s 4.5 percent target since 2010. Since August 2011, the central bank has cut its benchmark rate by more than any other Group of 20 nation to a record low 7.25 percent, and President Dilma Rousseff’s government has eliminated payroll taxes for dozens of industries and leaned on banks to lower lending rates.

“Low unemployment will keep service inflation pressured over the coming months and so overall inflation as well,” said Luciano Rostagno, chief strategist at Banco WestLB do Brasil SA. “The inflation scenario is not very good for Brazil.”

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, rose 4 basis points, or 0.04 percentage point, to 7.18 percent at 10:30 a.m. local time. The real weakened 0.2 percent to 2.0726 per U.S. dollar.

Consumer Prices

Consumer prices in mid-December posted the biggest monthly jump since May 2011, as measured by the IPCA-15 index. Annual inflation accelerated to 5.78 percent.

The central bank last month kept the overnight rate unchanged after cutting borrowing costs by 5.25 percentage points since August 2011 as it predicts a “non-linear” convergence of inflation to its 4.5 percent target. The bank said it would keep rates at their all-time low for a “prolonged” period to stimulate growth.

Lower unemployment will add additional steam to 2013 inflation that will likewise face pressure from the expiration of tax breaks, higher gasoline prices, and a moderate recovery in the global economy, Rostagno said.

Unemployment will drop to 4.1 percent in the fourth quarter of 2013, with inflation reaching 6.7 percent, according to BNP Paribas SA’s Global Outlook report released last month.

Job Creation

As unemployment has remained steady, creation of jobs has slowed. Brazil generated 1.37 million new jobs in the first 11 months of 2012, down 30.8 percent from last year and the least since the series began in 2003.

Average real income rose 0.8 percent in November and reached 1,810 reais ($873), its highest level since the series began in 2002, the statistics institute said. Near full employment, combined with rising wages, indicate that new jobs are unlikely to be created quickly in 2013, Pedro Tuesta, senior Latin America economist at 4Cast Inc., said by telephone.

“Wages have been increasing, productivity has been coming down, so there is space to grow without hiring,” Tuesta, one of two economists who correctly forecast today’s unemployment figure, said from New York on Dec. 20.


“The labor market looks like it will remain resilient unless we get a fresh economic shock,” Neil Shearing, chief emerging markets economist at Capital Economics Ltd., said by telephone from London. “The flip side is that productivity will need to be raised if we’re going to get decent economic growth over the next three to five years.”

While third quarter growth was 0.6 percent, half the level forecast by economists and government officials, it was still the highest since the first quarter of 2011, and there are other signs the economy is regaining its footing. Industrial production rose in October from the year before for the first time since August 2011.

All 1,500 workers at Daimler AG’s Mercedes-Benz bus and truck plant who were granted furloughs in June due to slackening demand will return to work in January, the ABC metalworkers’ union said in a statement this week. The factory’s second shift will be reactivated in February due to a 15 percent increase in production.

Brazil’s gross domestic product will expand 1 percent this year, and growth will quicken next year to 3.4 percent, according to the latest central bank survey of economists.

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