Itaú BBA - Unemployment rises to 13.1% in March

Macro Brazil

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Unemployment rises to 13.1% in March

abril 27, 2018

Using our seasonal adjustment, unemployment was stable at 12.5%

According to the national household survey (PNAD Contínua - IBGE), Brazil’s nation-wide unemployment rate climbed to 13.1% in the quarter ended in March from 12.6% in the quarter ended in February, driven mostly by labor market seasonality.

Using our seasonal adjustment, unemployment was stable at 12.5%, as the decline in the participation rate offset falling employment.

The real wage bill shrank 1.3% on a seasonally-adjusted quarterly basis, and the gain in year-over-year terms decelerated to 1.8% from 3.7%.

Labor market evolution in 1Q18 reinforces the downside to our forecast for GDP growth in 2018 (currently at 3.0%), given the outlook for a slower advance in household spending.

Lower participation rate offsets decline in employment 

The nation-wide unemployment rate climbed to 13.1%  in March[1] from 12.6% in February, printing above the median of market estimates and our call (both at 12.9%). Importantly, first-quarter readings are deeply affected by seasonality in layoffs. The unemployment rate is 0.6 p.p. lower than in March 2017.

Using our seasonal adjustment, unemployment was stable at 12.5%, The labor force shrank 0.1% in 1Q18 vs. 4Q17, but expanded 1.1% yoy. The participation rate (ratio of the labor force to the working-age population, both seasonally adjusted) has been receding in recent months (to 61.7% now from 61.9% in the quarter ended in November). Nevertheless, the participation rate remains much higher than its historical average (61.3%).

Employment receded 0.2% qoq/sa, but rose 1.8% yoy. Quarterly readings have been deteriorating since 3Q17, as a period of strong gains in informal jobs came to an end. 

Real wage bill shrinks during the quarter, dragged by falling real wages and lower employment

Nominal wages dropped 0.3% qoq in 1Q18, but expanded 2.5% yoy. The average real wage declined 0.7% qoq and 0.3% yoy.

With losses in real wages and employment, the real wage bill shrank 1.3% qoq, while the year-over-year increase slowed to 1.8% in 1Q18 from 3.7% in the quarter ended in February. 

Labor market situation in 1Q18 reinforces downside for economic growth in 2018

The many labor market indicators (PNAD, CAGED, DIEESE/SEADE, surveys) show a slowdown in employment and real wages, affecting the outlook for household spending this year and reinforcing the downside to 2018 GDP growth scenario (currently at 3.0%). 
 

Artur Manoel Passos 
 


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

 



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