Brazil Adds 370K Formal Jobs in Two Months, But Pace Falls 38% From Last Year

Brazil formal employment creation slowed sharply in the first two months of 2026, according to CAGED data published Tuesday by the Ministry of Labor. The economy added 370,339 net formal positions in January and February combined — a 37.8% drop from approximately 595,000 in the same period of 2025.

February accounted for 255,321 of those jobs, a significant improvement over January’s 115,018 but still 42% below February 2025’s 440,432. The deceleration reflects the cumulative drag of the Selic at 14.75% and GDP growth that slowed to just 0.1% quarter-over-quarter in Q4 2025.

Sector Breakdown

All five major economic sectors posted positive net job creation in February, but the distribution was uneven. Services dominated with 177,953 new positions, driven primarily by public administration, education, and health — sectors less sensitive to interest rate cycles.

Industry added 32,027 positions and construction contributed 31,099. Commerce, which typically contracts after the year-end holiday season, managed a modest 6,127 net gain. Agriculture posted 8,123 new positions.

The services sector’s outsized share — nearly 70% of February’s total — signals that job creation is increasingly concentrated in government-adjacent activities rather than private sector expansion. This aligns with Lula‘s 24,000 new public positions signed into law the same day.

The Selic Shadow

The year-over-year decline is the clearest labor market evidence yet that tight monetary policy is constraining the real economy. With the Selic at 14.75% and consumer credit costs rising, businesses face elevated borrowing costs that directly suppress hiring and investment decisions.

The Focus survey now expects only 150 basis points of Selic cuts in 2026 — half the 300bp anticipated before the Iran crisis. If the easing cycle remains slower than expected, the labor market deceleration will deepen in the months ahead.

Brazil’s total formal workforce stood at 48.83 million at the end of February, up 2.19% over the trailing twelve months. The labor market is still growing — but at a pace that is falling further behind the government’s fiscal and political ambitions in an election year.