Itaú BBA - Unemployment falls in July, driven by gains in informal jobs

Macro Brazil

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Unemployment falls in July, driven by gains in informal jobs

August 31, 2017

The nation-wide unemployment rate reached 12.8% (12,7% using our seasonal adjustment)

According to the national household survey (PNAD Contínua - IBGE), Brazil’s nation-wide unemployment rate declined to 12.8% in the quarter ended in July from 13.0% in the quarter ended in June. Using our seasonal adjustment, unemployment dropped for a fourth consecutive month to 12.7% from 12.9% in June. 

Formal employment in the private sector was stable at the margin, so that the slide in the unemployment rate was caused by higher employment in other categories, especially self-employment.

The real wage bill expanded 3.1% yoy, as real wages increased due to falling inflation. 

Year-over-year growth in employment for the first time in 23 months

The nation-wide unemployment rate reached 12.8% in July[1], below our estimate and the median of market expectations (both at 13.0%).The indicator increased 1.2 p.p. from 11.6% one year earlier. Applying our seasonal adjustment, the unemployment rate slipped to 12.7% from 12.9% in June, marking a fourth consecutive month of declines in the indicator. 

The labor force expanded 0.3% at margin and 1.6% yoy. The participation rate (ratio of the labor force to the working-age population) inched up to 61.8% from 61.7%, and is slightly higher than its historical average (61.3%).

Employment advanced 0.5% mom/sa and 0.2% yoy, in the first positive reading for the latter in 23 months. However, formal jobs in the private sector were stable at the margin, so that the gain in employment was driven by the other categories, particularly self-employment.

 

Real wage bill continues to expand 

Nominal wages rose 0.8% qoq in the quarter ended in July and 5.7% yoy.

The average real wage advanced 0.2% qoq and 2.6% yoy. These readings suggest that the downward pressure on wages caused by high unemployment has been partially offset by falling inflation. 

Growth in the real wage bill picked up in year-over-year terms to 3.1% in the quarter ended in July from 2.3% in the quarter ended in June, driven by higher real wages, given that employment growth was weak under that metric. At the margin, the real wage bill went up as both factors advanced.

 


 

Artur Manoel Passos
Alexandre Gomes da Cunha


 


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


 

 



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