Brazil Unemployment Rate Rises in June to Near Five-Year High

Brazil’s unemployment rate rose in June to the highest in nearly five years, as the central bank continues to boost rates in the face of a looming recession.

The jobless rate increased to 6.9 percent from 6.7 percent a month earlier, the national statistics institute said Thursday. That was the highest since July 2010 and in line with the median estimate from 40 economists surveyed by Bloomberg.

Unemployment is on the rise in Latin America’s largest economy as it heads toward its deepest recession in a quarter century. President Dilma Rousseff has espoused macroeconomic adjustment to avoid a sovereign credit downgrade, and also vetoed a congressional initiative to boost judicial salaries that would’ve undermined austerity. With inflation eating into real wages, approval of her government is dwindling.

Swap rates on the contract due in January 2017 rose 10 basis points, or 0.10 percentage point, to 13.43 percent at 9:07 a.m. local time. The real weakened 1.1 percent to 3.2589 per U.S. dollar.

Rousseff this month sent a decree to Congress to use a government fund to pay half the salary lost by reducing worker hours by as much as 30 percent. Companies have until December to enroll in the program for six months, with the option to extend an additional six months, during which time they won’t be allowed to lay off workers.

Last month she signed into law a measure to reduce unemployment benefits, which forms part of Finance Minister Joaquim Levy’s macroeconomic adjustment. This week she also vetoed a bill to boost judiciary workers’ wages to protect savings achieved by this year’s fiscal measures.

Approval Rating

Joblessness is weighing on consumer confidence, which is hovering just above a record low, and on Rousseff’s approval rating. In a poll released Monday, approval of her government fell to 7.7 percent from 10.8 percent in March. The MDA poll of 2,002 people was conducted July 12-16 with a margin of error of plus or minus 2.2 percentage points.

Average real wages in June fell 2.9 percent from the same month last year, the statistics agency said.

As the government tightens fiscal policy, the central bank has likewise tightened monetary policy. Boosting the benchmark interest rate at six straight meetings to 13.75 percent has done little to rein in price increases. Inflation in the 12 months through mid-July accelerated to 9.25 percent, its fastest since 2003 and more than double the 4.5 percent target.

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