Brazil unexpectedly lost jobs in April for the first time on record as the economy heads toward the deepest recession in 25 years.
Latin America’s biggest economy shed 97,828 formal job posts, a report published by the Labor Ministry showed on Friday. Analysts expected the creation of 48,000 jobs, according to the median estimate in a Bloomberg survey of 18 economists. This was the first time the economy lost jobs in April since the start of the series in 2002.
Record low unemployment levels during President Dilma Rousseff’s first term helped her win re-election last year. Now, her administration is raising borrowing costs, increasing taxes and reducing spending in order to tame above-target inflation and narrow the budget deficit. While the measures may help the country avert a credit rating downgrade and restore investor confidence, they are having a negative impact on growth in the short term.
“This is surprising and shows just how bad the labor market is,” said Rodrigo Melo, chief economist at Rio de Janeiro-based Icatu Vanguarda Administracao. This result may lead analysts to “cut their projections for this year’s gross domestic product.”
Market sold off after the release, with swap rates maturing January 2017 erasing earlier gains to fall 7 basis points, or 0.07 percentage point, to 13.29 percent at 4:14 p.m. in Sao Paulo.