MacroScope

Brazil set to release long-overdue jobless rate just as election race heats up

Workers at a General Motors vehicle factory listen during a meeting to discuss their reactions to an announcement of plans to put some 1,000 workers on paid leave, in Sao Jose dos CamposBrazil’s unemployment rate has been a mystery for months: a strike in the country’s statistics agency, ironically enough, disrupted its main job market survey. The numbers will finally come out in a few hours, less than two weeks before a tight presidential election, and will help voters understand just how bad the recently-confirmed recession has been.

IBGE’s August unemployment report is important not only because it can tilt Brazil’s election balance in favor of current President Dilma Rousseff or her opponent Marina Silva, but also because it will determine the starting point of the labor market for a much-anticipated adjustment in Brazil’s economic policy. Some kind of shift is expected after the October election regardless of who wins, to keep debt under control and avoid losing the investment grade in coming years.

Looking at market estimates, one can expect anything, apparently. The range of forecasts in a Reuters poll was about three times as wide as in previous months, going from 4.5 percent, near a record low, to 5.8 percent, which would be the highest for August in three years. Either the recession has spared the job market so far, in good news for re-election candidate Rousseff, or it is now a reality for thousands of workers across Latin America’s largest economy.

The median forecast is 4.9 percent, exactly the same rate reported in April. But some signs suggest a small increase is the most likely scenario, which would reinforce the outlook of a gradual but steady deterioration of one of the world’s strongest labor markets just a few years ago.

Although the job market numbers have been held off since April, data on four of the six urban areas surveyed has been released by statistics agency IBGE, including Sao Paulo and Rio de Janeiro, the country’s largest cities.

Euro zone perspective – nowhere near out of the woods

After the Easter break, a bit of perspective — to paraphrase the immortal Spinal Tap, maybe too much perspective.

Over the past two weeks, Spanish and Italian borrowing costs have continued to rise – in the former’s case they have now relinquished more than half their fall since December and are heading back into the danger zone. Stocks have also appeared to have given up on their first quarter rally, presumably testament to the realization that the ECB and other top central banks are unlikely to be writing any more blank cheques for banks to reinvest.

Late last year, it was Italy that seemed to have the power to drag Spain into the debt crisis mire. Now, it’s the other way round and after the ECB anaesthesia  wears off, it’s clear the euro zone patient is still sickly.