Itaú BBA - Unemployment reaches 13.7% in 1Q17

Macro Brazil

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Unemployment reaches 13.7% in 1Q17

April 28, 2017

Real wage bill on the rise, despite falling employment

According to the national household survey (PNAD Contínua - IBGE), Brazil’s nation-wide unemployment rate climbed to 13.7% in 1Q17 from 13.2% in the quarter ended in February. Using our seasonal adjustment, the rate increased for the 28th consecutive month, to 13.2% in March from 13.1% in February. We expect unemployment to continue its upward trend throughout the year.

Disinflation is leading to gains in the real wage bill, notwithstanding the decline in employment.

Unemployment rate is 2.8 p.p. higher than in March 2016

The nation-wide unemployment rate reached 13.7% in March 1, slightly above our estimate (13.5%) and in line with market consensus.The indicator increased 2.8 p.p. from 10.9% one year ago. Applying our seasonal adjustment, the unemployment rate rose to 13.2% in March from 13.1% in February. The labor force expanded 0.1% mom s.a. and 1.4% yoy. Employment fell 0.1% during the month and is 1.9% lower than in March 2016. Formal jobs in the private sector (-0.5% mom/sa) were behind the decline in overall employment.

The seasonally-adjusted participation rate (ratio of the labor force to the working-age population) increased 0.1 p.p. to 61.6% and remains slightly above its historical average (61.3%).

Real wage bill continues to improve

Nominal wages climbed 1.0% mom/sa in March and picked up to 7.2% from 6.8% yoy.

The average real wage advanced 0.8% mom/sa, the sixth consecutive gain at the margin, and continues to benefit from disinflation. The indicator is up by 2.3% yoy.

The real wage bill expanded 0.6% during the month, as disinflation more than offset the decline in employment. This indicator continues to show improvement (see chart) in year-over-year terms, rising 0.6% in March after falling 0.3% in February.

Conclusion 

PNAD Contínua continues to show an increase in unemployment, with the rate climbing to 13.2% from 13.1% (using our seasonal adjustment), marking the 28th consecutive advance. We expect unemployment to continue its upward trend, as the drop in economic activity has not yet been fully reflected in the labor market. 

Artur Manoel Passos


 

 



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