Brazil August Unemployment Rate Equals Record Low for MonthDavid Biller and Peter Millard
Brazil’s unemployment rate in August unexpectedly fell, signaling continued recovery in the world’s second-biggest emerging market. Swap rates rose.
The jobless rate dropped to 5.3 percent from 5.6 percent in July, the national statistics agency said in Rio de Janeiro today. That was the lowest since the 4.6 percent recorded in December and equaled the record low for the month set last year. It also was less than forecast by all 32 economists surveyed by Bloomberg, whose median estimate was 5.6 percent.
Unemployment in Latin America’s largest economy has remained near historic lows even as the economy slowed during the first two years of President Dilma Rousseff’s administration. The labor market has put pressure on inflation that in April prompted the central bank to start raising borrowing costs.
“It’s good news for the labor market and indirectly for consumers as well,” Neil Shearing, chief emerging-markets economist at Capital Economics, said by phone from London. “The economy was strong in second quarter and seems like it’s been recovering.”
Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, rose five basis points, or 0.05 percentage point, to 9.29 percent at 9:57 a.m. local time. The real strengthened 0.6 percent to 2.2195 per U.S. dollar.
Brazil’s inflation rate in the month through mid-September slowed to 5.93 percent, falling below 6 percent for the first time this year while remaining above the 4.5 percent midpoint of the central bank’s target range. To tame inflation, the central bank increased the benchmark Selic rate by 175 basis points since April in four monetary policy meetings. Low unemployment may continue to be a concern for the bank, Shearing said.
The economy expanded 1.5 percent in the second quarter from the prior period, marking the first time growth exceeded 1 percent since the end of 2010.
The labor force remained stable at 24.5 million people in August as the number of unemployed fell to 1.3 million from 1.38 million, the statistics agency said.
Brazil’s economy created 127,648 government-registered jobs in August, the most since April and beating all but one estimate of analysts surveyed by Bloomberg. The nation has generated about 702,700 jobs so far this year, down from 1.1 million in the same period a year ago.
While the market is reacting to the positive unemployment number, the breakdown indicates weakness in the job market, and joblessness could rise to 7 percent by mid-2014, according to Roberto Padovani, chief economist at Votorantim Ctvm Ltda.
“There are signs the labor market is losing skin,” Padovani said by phone from Sao Paulo. “Unemployment is stable over the past year, employed people are increasing at a lower pace, and fewer people are looking for jobs.”