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Brazil January Jobless Rate Below All Economist Forecasts

Brazil’s unemployment rate in January was lower than all estimates from economists surveyed by Bloomberg, as the labor market remained strong amid rising interest rates.

The jobless rate rose to 4.8 percent from 4.3 percent in December, the national statistics agency said in Rio de Janeiro today. That was lower than forecast by all 37 economists surveyed by Bloomberg, whose median estimate was 5.1 percent. Adjusted for seasonality, the January jobless rate fell from December and was the lowest on record, according to Carlos Kawall, chief economist at Banco J. Safra in Sao Paulo.

Unemployment in the world’s second-largest emerging market ended 2013 at a record low, helping boost consumer demand that in turn stoked above-target inflation. Central bank President Alexandre Tombini has responded by boosting benchmark borrowing costs in seven straight meetings while introducing measures to stem a decline in the real that threatens to increase import prices.

“It’s a tough message for the central bank,” Kawall said by phone from Sao Paulo. “While the economy doesn’t seem to be going onto a very strong path, unemployment is still very low, and wages are still moving up. So it creates a real dilemma for the bank.”

Swap rates on the contract maturing in January 2015 rose two basis points, or 0.02 percentage point, to 11.15 percent at 9:49 a.m. local time. The real, which has depreciated 17.9 percent in the last year, strengthened 0.1 percent to 2.3907 per U.S. dollar.

Budget Cuts

Inflation in 2013 accelerated to 5.91 percent, exceeding the central bank’s 4.5 percent target and the previous year’s rate of 5.84 percent. Policy makers, who next meet Feb. 25-26, have raised the benchmark Selic from a record-low 7.25 percent in April to 10.5 percent. Finance Minister Guido Mantega will speak today to announce government budget cuts.

Today’s data “show that while inflation in the near-term has improved there are many challenges ahead and the labor market is the main one, along with the currency,” Kawall said. “It puts a lot of weight on the announcement today.”

Average real income in Brazil rose to 1,984 reais ($830) in January from 1,979 reais in December, the statistics agency said. The labor force fell 0.5 percent to 24.3 million.

Brazil in 2013 created 730,687 jobs, the fewest since 2003. Brazil’s government won’t try to slow inflation by easing growth in the labor market, Labor Minister Manoel Dias told reporters Jan. 21, adding the economy will add 1.4 million to 1.5 million jobs this year.

Today’s data offsets some of the disappointment of recent economic activity figures, according to Jankiel Santos, chief economist at Banco Espirito Santo de Investimento. Brazil’s industrial production in December fell 3.5 percent, below all estimates. Retail sales in 2013 rose by the least in a decade.

The unemployment survey evaluates the job market in six metropolitan areas and is scheduled to be replaced by a nationwide survey in 2015.

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