Brazil: Gains in informal jobs slowed down in October

Unemployment remains stable, according to our seasonal adjustment.

• According to the national household survey (PNAD Contínua – IBGE), Brazil’s nation-wide unemployment rate fell to 12.2% in the quarter ended in October from 12.4% in 3Q17. Using our seasonal adjustment, unemployment was stable at 12.5%.

• Informal jobs are still a big driver for the decline in unemployment on a quarterly basis. However, the advance in the category started to slow down at the margin.

• The real wage bill expanded 4.2% yoy and 0.8% vs. the quarter ended in July.

Informal jobs contribute less to the slide in unemployment

The nation-wide unemployment rate reached 12.2% in October[1], in line with expectations (median of market estimates: 12.2%; Itaú: 12.3%). The indicator increased 0.4 p.p. from 11.8% one year earlier. Applying our seasonal adjustment, the unemployment rate was stable at 12.5%.

The labor force was flat at the margin and expanded 2.3% yoy. The participation rate (ratio of the labor force to the working-age population) remained stable at 61.8%, above its historical average (61.3%). Employment was also unchanged during the month and increased 1.8% yoy.

Informal jobs are still the main driver of employment growth. However, their contribution to the decline in unemployment was smaller in the quarter ended in October vs. the previous quarter.

Average real wage is virtually unchanged

Nominal wages rose 1.2% qoq in the quarter ended in October and 4.6% yoy.

The average real wage was virtually unchanged on a quarterly basis and advanced 2.0% yoy. These readings suggest that the downward pressure on real wages caused by high unemployment has been partially offset by falling inflation.

The real wage bill climbed 4.2% yoy, boosted by higher employment and higher real wages. On a seasonally-adjusted quarterly basis, the indicator increased 0.8%, supported mostly by employment growth.

We expect unemployment to recede to 11.8% by the end of 2018

Using models that contemplate the sensitivities of different types of occupation to economic activity and our scenario for GDP growth (0.8% in 2017; 3.0% in 2018), we expect the seasonally-adjusted unemployment rate to fall to 11.8% by the end of 2018, thanks to a growing contribution from formal jobs.

Fuente: ITAU

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