Unemployment slid 0.1pp to 12.4%, driven by a small decline in the participation rate.
• According to the national household survey (PNAD Contínua – IBGE), Brazil’s nation-wide unemployment rate fell to 11.8% in 4Q17 from 12.0% in the quarter ended in November.
• Using our seasonal adjustment, unemployment slid 0.1 p.p. to 12.4%. The drop at the margin was driven by a small decline in the participation rate.
• The contribution provided by informal employment remains relevant but has lost momentum, while gains in formal employment in the private sector have been improving gradually. This process is set to pick up ahead, as the economic recovery consolidates and becomes more widespread.
• The real wage bill expanded 3.5% yoy and 1.2% vs. the quarter ended in September.
Drop in unemployment becomes less reliant on growth in informal jobs
The nation-wide unemployment rate reached 11.8% in December, or 0.1 p.p. below expectations (median of market estimates: 11.9%; Itaú: 11.9%). For the first time since the recovery started, unemployment printed lower than one year earlier (12.0% in December 2016). Applying our seasonal adjustment, the unemployment rate receded 0.1 p.p. to 12.4%.
The labor force grew 0.2% qoq in 4Q17 and 1.8% yoy. The participation rate (ratio of the labor force to the working-age population) fell to 61.8% from 61.9% and explains the drop in seasonally-adjusted unemployment. Nevertheless, the participation rate remains well above its historical average (61.3%). Employment increased 0.4% qoq/sa and 2.0% yoy.
Informal positions were less relevant to the decline in unemployment in 4Q17, when their contribution was -0.49 p.p. vs. -0.9 p.p. on average in the two previous quarters.
Meanwhile, formal employment in the private sector increased at the margin, in line with the improvement in formal job creation seen in the Labor Ministry’s CAGED registry.
Rising average wage and employment boost the real wage bill
Nominal wages rose 1.5% qoq in 4Q17 and 4.0% yoy. The average real wage climbed 0.4% qoq and 1.1% yoy.
The real wage bill expanded 3.5% yoy and 1.2% qoq, boosted by higher employment and higher real wages under both metrics.
Artur Manoel Passos