Brazil’s job market hints at more painful downturn

March 19, 2015

A job promoter sits close to list of job offers posted along a main street in downtown Sao Paulo

The rapid erosion of Brazil’s job market is taking most economists by surprise, an analysis of Reuters Polls data shows, in a worrying sign that already-grim expectations for Latin America’s largest economy have not been pessimistic enough.

Economists overestimated official payroll data in four of the past five months, according to the surveys, failing to accurately predict the sharp decline in job creation. Brazil lost a net 47,228 payroll jobs in the 12 months through February, the worst performance in more than 15 years, government data showed on Tuesday.

Five years ago, Brazil’s economy created more than 2 million jobs a year.

Here is how market forecasts (in blue) have been faring, month by month. December is usually a month of strong layoffs as temporary contracts expire after the holiday shopping season.


There are other signs of weakness in the labor market, the brightest spot of Brazil’s booming economy not so long ago. A growing number of workers being fired from their full-time jobs are freelancing as maids and truck drivers to make ends meet, often losing access to welfare benefits. When they find a job, admission salaries are 2.1 percent lower than one year before, according to official data compiled by Sao Paulo-based consultancy firm MCM Consultores.

It’s true that Brazil’s job market remains in much better shape than in the early 2000’s, when the unemployment rate topped 13 percent and the monthly minimum wage was a third of what it is now. Brazil’s economic slowdown started in 2011, and for many years economists were puzzled by the resilience of a job market in which the unemployment rate hit record lows one after another.

But as job creation sinks, so does President Dilma Rousseff’s popularity – and market forecasts for economic growth. Brazil’s economy is expected to shrink 0.8 percent in 2015, the steepest in 25 years, according to a weekly central bank poll with about 100 analysts. The question is: have they fallen enough?

“It’s time to move the goalposts,” wrote Marcelo Carvalho, head of ‎Latin America Economic Research at BNP Paribas, as he cut his forecast for Brazil’s 2015 growth to -2.0 percent from -1.0 percent late last week. “What’s more, as low and below consensus as our real GDP growth forecast is, we fear the risks remain biased to the downside.”

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