Itaú BBA - Higher participation rate lifts unemployment in January

Macro Brazil

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Higher participation rate lifts unemployment in January

February 28, 2018

Informal employment was virtually stable in seasonally-adjusted terms in the last two releases

According to the national household survey (PNAD Contínua - IBGE), Brazil’s nation-wide unemployment rate climbed to 12.2% in the quarter ended in January from 11.8% in 4Q17, driven by labor market seasonality as well as year-end layoffs. 

Using our seasonal adjustment, unemployment rose 0.1 p.p. to 12.5%, led by a small increase in the participation rate.

Informal employment was virtually stable in seasonally-adjusted terms in the last two releases, breaking a string of eight consecutive hikes during 2017. 

The real wage bill expanded 3.6% yoy and 0.7% vs. the quarter ended in October.

Higher unemployment reflects seasonality and participation rate

The nation-wide unemployment rate climbed to 12.2%  in January[1], topping the median of market estimates (12.0%) and our call (12.1%). Importantly, these readings were deeply affected by seasonality in layoffs, which typically pick up by year-end. The unemployment rate is 0.4 p.p. lower than in January 2017.

Using our seasonal adjustment, unemployment rose 0.1 p.p. to 12.5%,

The labor force grew 0.2% in the quarter ended in January compared to the August-October period and 1.6% yoy. The participation rate (ratio of the labor force to the working-age population) advanced to 61.9% from 61.8%, explaining the seasonally-adjusted increase in unemployment and getting farther from its historical average (61.3%).

Employment expanded 0.3% qoq/sa and 2.1% yoy. Quarterly gains have been decelerating since 3Q17, due to slower growth in informal jobs. The chart above on the right shows the declining contribution from informal employment – referred to as “Employment (others, including informal jobs)” — to the drop in unemployment over 3 months. 
 

Rising average wage and employment boost the real wage bill 

Nominal wages rose 1.2% qoq in the quarter ended in January and 4.1% yoy. The average real wage climbed 0.2% qoq and 1.2% yoy. 

The real wage bill expanded 3.6% yoy and 0.7% qoq, boosted by higher employment and higher real wages under both metrics. 

 

Artur Manoel Passos

 


[1] All figures in the Continuous PNAD are in the form of three-month moving averages.

 



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