RIO DE JANEIRO, BRAZIL – Insufficient job creation is keeping unemployment at record levels when considering the labor market as a whole, including the informal economy, data from the Brazilian Institute of Geography and Statistics (IBGE) show.
In addition, the total number of employed indicates the cut of 7.7 million jobs when compared to the pre-pandemic scenario.
According to the IBGE, the 14.6% unemployment rate in the quarter through May, with 14.795 million people unemployed – at historic highs – rises to 29.3% including the discouraged (who have simply given up looking for work) and the under-employed (who work less than they would like). Brazil lacks work for 32.9 million people, the equivalent of the populations of Angola or Malaysia.
Unemployment has remained at record levels because more people are looking for work. A year ago, the unemployment rate stood at 12.9%. According to Adriana Beringuy, IBGE’s Labor and Income Coordination analyst, the increase is due to a particular feature of the Covid-19 crisis.
At an early stage of the pandemic, formal or informal workers who lost their jobs stayed at home and did not look for work due to social contact restrictions. According to the international methodologies followed by the IBGE, only people looking for a job are considered unemployed. “Many people, despite not working, were not looking for a job,” Adriana said.
The relaxation of restrictive measures and the curtailing of emergency cash payments, led informal workers to return to the market, actively seeking employment. In other words, unemployment is not at its historical peaks because of more layoffs. On the contrary, the evolution of the employed population points to the net creation of 840,000 formal and informal jobs in one year.
Scenario
Economists expect unemployment to drop in the second half of the year, with the progress of vaccination favoring a resumption of economic activity, but the country will still experience high unemployment rates for quite some time.
“As the economy recovers, demand for employment increases, but the return of economic activity also leads to an increase in demand on the part of workers. There will be a time in which the rate will remain basically stable and then it will start to drop,” said José Márcio Camargo, chief economist at Genial Investimentos, forecasting a drop in the unemployment rate to a level between 12.5% and 13% by the end of 2021.
In a note, XP Investimentos economist Rodolfo Margato projected that the employed population should only return to the pre-pandemic level in the third quarter of 2022.
ABC Brasil Bank’s senior economist Daniel Xavier also expects a gradual reduction in unemployment. For next year, he estimates a 12.5% unemployment rate in the last quarter and an average of around 13% for the year.
Original Bank’s economist Lisandra Barbero expects an average unemployment rate of 14.0% in 2022. She is more pessimistic because the progress of vaccination and the economy’s reopening may lead the growth in the number of workers looking for jobs to a rate higher than the opening of vacancies.
According to Barbero, the labor market trends are gradual in part because of Brazil’s own particularities. The economist recalls that the unemployment rate has remained in double digits since 2014. “One of the reasons is that hiring and firing in Brazil is a very expensive, time-consuming process. Much confidence is needed to decide,” she said.