Brazil’s Unemployment Rises More Than All Forecasts in July

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Brazil’s unemployment rate rose more than forecast by all analysts as the country heads to its longest recession since 1931.

The jobless rate rose to 7.5 percent in July from 6.9 percent a month earlier, the national statistics institute said Thursday. The highest jobless level in more than five years compares with a median estimate of 7 percent in a Bloomberg survey of 37 analysts.

With joblessness on the rise and above-target inflation eating into real wages, consumption has been declining. Likewise, President Dilma Rousseff’s approval rating has tumbled to an all-time low. Diminished support has complicated her team’s efforts to keep a lid on spending with lawmakers maneuvering to undermine its austerity program.

“The speed of this deterioration is quite surprising,” Bruno Rovai, Brazil economist at Barclays Plc, said by phone from New York. “The outlook for the second half actually becomes much worse with these numbers; you can have even further contraction of household consumption.”

Swap rates on the contract due in January 2017 fell 6 basis points, or 0.06 percentage point, to 13.74 percent at 9:53 a.m. local time. The real strengthened 0.2 percent to 3.4850 per U.S. dollar.

The government has been courting lawmakers in an effort to build support for restoration of fiscal accounts. Congress has imperiled the attempted belt tightening with so-called fiscal bombs that boost spending, including one bill the lower house passed Tuesday to double the yield for the FGTS workers’ fund.

Corporate Taxes

The Senate, for its part, approved a bill Wednesday to increase corporate taxes, which is the last of the major measures comprising the government’s fiscal adjustment package. Industry association Fiesp opposed the bill, and said in June its passage would prompt 54 percent of companies to fire workers, according to a survey of 339 firms.

The Fiesp survey also said the bill’s passage would lead to increased prices in 40 percent of industries seeking to pass costs along to consumers. That’s of critical concern for the government at the moment with inflation in the 12 months through July having accelerated to 9.56 percent, its fastest since 2003 and more than double the 4.5 percent target.

Given the rise in inflation, average real wages in July fell 2.4 percent from the same month last year, the statistics agency said. The central bank has raised the benchmark interest rate to its highest since 2006 to slow price increases.

With consumers feeling the pinch of inflation and troubled by rising joblessness, Brazil’s retail sales fell every month in the second quarter. Consumer confidence as measured by the Getulio Vargas Foundation is at its lowest level since the survey began almost a decade ago.

Only 8 percent of Brazilians polled by Datafolha said Rousseff is doing a good job, according to a Aug. 4-5 survey.

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