The most recent data on the Brazilian labor market reveal a scenario that may seem contradictory at first glance: an increase in the proportion of people working, but with lower wages — in addition to a record number of workers without a formal contract.
“It’s a glass half full or half empty, depending on how you look at it”, summarizes Bráulio Borges, senior economist at the LCA consultancy and an associate researcher at FGV IBRE.
IBGE: 4.5 million people gave up looking for a job
The 9.3% unemployment rate, recorded in the April-June 2022 quarter, is the lowest for the second quarter since 2015, according to the Brazilian Institute of Geography and Statistics (IBGE). Commerce, civil construction, domestic services and other services are among the areas that account for greater job creation. (See below for a complete list of areas with the highest increases).
The area of domestic services, which includes maids and day laborers, is among those with the highest growth — Photo: Getty Images/Via BBC
Borges pointed out that, “looking at the number of people employed, we haven’t seen the Brazilian job market in such a favorable situation for seven years.” However, he added that a more detailed analysis shows that “it is not such a good situation”, referring to aspects such as the 5.1% drop in real average income (R$ 2,652) in relation to the same period of the year. previous.
See below the areas that are hiring the most in Brazil — and then understand how this composition helps to explain the current situation of the Brazilian labor market.
Increase in the employed population (2nd quarter of 2022 compared to 2nd quarter of 2021):
- Accommodation and food (23.1%, or more than 1 million people)
- Domestic services (18.7%, or more than 931 thousand people)
- Other services* (18.7%, or more than 805 thousand people)
- Trade, repair of motor vehicles and motorcycles (14.2%, or more than 2.4 million people)
- Construction (11.2%, or more than 753 thousand people)
- General industry (10.2%, or more than 1.2 million people)
- Transport, storage and mail (10%, or more than 463 thousand people)
- Public administration, defense, social security, education, human health and social services (5.5%, or more than 893 thousand people)
- Information, communication and financial, real estate, professional and administrative activities (5.1%, or more than 568 thousand people)
*Artistic, cultural, sporting and recreational services; personal services, maintenance and repair of equipment and personal and domestic objects.
**The other groups of activities did not have significant variations, according to the IBGE
To generate quality jobs, economists point out that the country needs to grow strongly and sustainably — Photo: Getty Images/Via BBC
It is important to remember that the IBGE’s occupation data do not only consider formal jobs (with a formal contract), but also informal jobs. Among self-employed workers (also called self-employed), it considers both those with and without CNPJ.
‘More jobs than GDP’
Generally, economists expect that movements in the labor market will accompany economic activity with a certain delay, as pointed out by Ipea researcher Maria Andreia Lameiras.
“At times when the economy is already in crisis, the labor market takes a little longer to enter into crisis. And the opposite also happens. Moments when the economy is recovering first, the labor market has been recovering later”, it says.
However, this general rule does not seem to apply to the current situation. The economist highlights the particular characteristic of the impacts of the most recent crisis, “coming from a health factor” and recalls that the restrictions in response to the pandemic have especially affected the service sector, which greatly pulls the job market in Brazil.
Now, says Lameiras, “everything that was greatly affected in the pandemic is growing strongly again”. “We have a brutal increase in demand for services and we know that the service sector is the one that employs the most in Brazil. So all the repressed demand that we had, due to the pandemic, it reaches the market at once Other than that, you have Auxílio Brasil, which is putting money into the economy as a whole.”
It highlights the growth of occupations in the areas of services provided to families, including domestic services (maid or day laborer), recreation, leisure, beauty and aesthetics.
Borges, from FGV IBRE, says that the best expression to summarize the behavior of the Brazilian economy in the last year – and especially in the first half of 2022 – is that “we have more jobs than GDP”.
He makes the caveat that current forecasts for 2022 GDP, currently around 2%, are higher than they were a few months ago (when some analysts even projected that GDP could even shrink this year). “For several reasons: commodities rose after the war; we removed the risk of blackout that was haunting us at the end of last year because of the drought; we also have this set of stimulus measures that the government is adopting, some with clearly electoral bias, but obviously this ends up helping the economy”.
Even with this increase in predictions, however, Borges says the occupancy data is better than theory would suggest. According to the so-called Okun’s Law, which makes a relationship between the evolution of the unemployment rate and the dynamics of GDP, the unemployment rate would be closer to 11% (than 9%) for a GDP of about 2%, according to the economist’s calculations.
And what explains this? In part, he says, the characteristics of the areas that are driving this improvement. “We see that the Brazilian GDP is being very pulled this year and since the end of last year by some segments that demand a lot of manpower, mainly services – ‘other services’ in general, domestic services – and civil construction “.
‘Wages are really losing, and a lot, from inflation, even with the economy generating more and more jobs’, says Borges – Photo: Reuters/Via BBC
Lower salary and record number of informal workers
However, this also helps to explain the drop in real wages. “These sectors demand a lot of manpower, but, at the same time, they pay low wages, generally just above the minimum wage, and this helps to understand a little another aspect: real wages are also falling”, says Borges.
He points out that this was not what was expected. “It’s a different situation, because with an unemployment rate of 9.3%, we would expect the behavior of wages to be more favorable”, he says. “So wages are really losing, and a lot, from inflation, even as the economy generates more and more jobs in quantitative terms.”
Also noteworthy is the record number of unregistered workers in the private sector (13 million), the highest in the series. The increase was 23% compared to the same period of the previous year — much higher than the 11.5% increase in the number of registered employees in the same period.
Lameiras considers the strength of informal employment to be “natural” at this time, as it was the one that suffered the most in the pandemic and highlights that the service sector, which drives growth “is a really intensive sector in informal labor”.
The economist also says that it is expected that, at the end of a recession, informal employment will appear first, while the employee “is not very clear whether this process of resumption of growth is a lasting process”. “As long as he is not sure, he will leave that worker there in informality”, she says.
“There will always be informal employment, but we can reduce it, bringing this worker without a formal contract to the worker with a formal contract, this self-employed person for a self-employed person with a CNPJ — and the path is economic growth. There is no more effective way to create employment of quality than growing in a strong and sustainable way.”
Borges believes that Brazil will end 2023 with growth of around 2% and unemployment of around 9%, but says that the picture is more uncertain for next year.
“Many of these measures that the government is using to boost GDP this year are short-lived. They will anticipate consumption and anticipate GDP for this year and, in quotes, steal it from next year. And then obviously this ends up impacting the market negatively throughout 2023”.