Brazil: the slowdown in the economy cools down the job market, and job creation is expected to decrease

By Vandré Kramer

The pace of job openings in Brazil is slowing down.

Last year, according to the General Cadastre for Employed and Unemployed (New Caged), 2.01 million formal jobs were created, 29.5% less than the previous year.

The slowdown should be stronger in 2023: a bank already forecasts the generation of only 500,000 formal jobs during the year.

The main reason for this scenario is the deceleration in economic activity, which started in the second half of last year.

Between July – the best moment in 2022 – and December, the country’s economic activity level fell 2.5%, according to the IBC-Br index, calculated by the Central Bank.

Market expectations for the Gross Domestic Product (GDP) also reflect this slowdown.

If 2022’s median projection indicates a high of 3% (the official data from IBGE comes out next Thursday), for 2023, the market consensus points to a 0.84% economic growth.

This loss of vigor is motivated by less fiscal room for expansion of government spending, the high level of interest rates, and the more adverse environment in global terms – reflecting the worsening of financial conditions and the expectation of reduced commodity prices.

SLOWDOWN GAINED STRENGTH IN THE LAST QUARTER

Bradesco points out that the pace of formal hiring lost more strength in the last quarter of 2022. The trend is that this scenario is repeated this year.

The expectation is that the pace of net job creation will be below that observed between 2021 and 2022 but still in positive territory.

The bank projects a net generation of 500,000 formal jobs.

Tendências Consultoria also forecasts an accommodation in the labor market.

Analyst Lucas Assis says that the less expressive growth of the Brazilian economy should reduce the hiring impetus.

The growth of the employed population has lost momentum in recent months, especially among informal workers.

The number of self-employed workers fell from 25.9 million in the quarter ending in August to 25.5 million in November.

A similar situation occurred among family helpers. The number of employed fell from 1.8 million to 1.6 million in that period.

“Amid the exhaustion of the momentum generated by the normalization of face-to-face services, the level of occupation remained at 57.4% in the quarter ended in November, lower than the level in place before the crisis of the 2015-16 biennium (58.4% on average between 2012-2014 for the same quarter), suggesting a certain idleness in the labor market,” Assis says.

SCENARIOS FOR THE UNEMPLOYMENT RATE

The unemployment rate has been falling since February 2022, when it was 11.2%, according to IBGE’s Pnad Continuous Survey.

The latest available data from November shows that it fell to 8.1%, the lowest level since April 2015.

But the reasons for the drop have changed.

“Unlike what happened during the recovery process, which began in mid-2021, its recent drop has not been provided by the expansion of occupation, but rather by a retraction in the labor force,” highlights Assis from Tendências.

The unemployment rate is measured by the labor force, the total number of people working or looking for a job.

If a large number of people give up looking for a job, this reduces the labor force – thus, the unemployment rate can fall even if there is no increase in hiring.

Several factors weigh on the retraction of the labor force, points out the analyst.

Among them the withdrawal of older people from the labor market and the disincentive to seek employment caused by government income transfers.

He evaluates that in the short term, even in the face of the loss of dynamism in occupation, the unemployment rate should still slightly drop, benefiting from the modest performance of the labor force.

But, given the projections of a slowdown in economic activity by the end of the year, the signs are of an increase in unemployment.

“The generation of vacancies in the private sector is decelerating,” points out the economic analysis team at Itaú.

According to Focus, the median of the projections for the unemployment rate at the end of 2023 is 8.7%, above the midpoint of the forecasts for December 2022 (8%) and the latest data calculated by IBGE, the aforementioned index of 8.1% in November.

WHERE WILL THE JOBS BE IN 2023?

Fewer formal job opportunities should be open in 2023, after two consecutive years of net creation of more than 2 million formal jobs.

Although the balance should be more discrete this year, it will still be positive, and hiring should be disseminated among the main economic activities.

The highlight should again be the services sector.

Tendências evaluates that the expectation is to maintain growth in the volume provided to families, one of the most relevant segments.

Between January and November 2022, the expansion was 8.5%, compared to the previous year, points out IBGE.

“The expectation is for maintenance of the growth of services to families, capturing both the rise in income from the labor market (although limited by the first negative signs of occupation) and, from the point of view of classes, by the higher income families, either by the positive performance of their income or by the possibility of using savings,” says Assis, from Tendências.

The evolution of work in the industrial sector – which created 252,000 opportunities last year, according to the New Caged – should remain limited.

According to the analyst, the explanation lies in the low production of durable and capital goods due to the restrictive scenario influenced by high interest rates and uncertainties regarding economic policy.

Another factor that reinforces the loss of dynamism in the industrial sector is the expectation of lower growth in the world economy.

The International Monetary Fund (IMF) projects that world GDP will increase by 2.9% in 2023, after an estimated 3.4% in 2022.

The relatively positive scenario for household income in 2023 should benefit the less credit-sensitive goods segment, such as food and non-durable goods.

One sector that should register a cooling down in the formal labor market is civil construction.

This, according to Assis, has already happened in the self-construction market and is expected for the medium and high-standard segments.

TRENDS FOR THE LABOR MARKET IN THE COMING YEARS

Assis assesses that in the coming years, the formalization of the labor market may benefit from the late effects of the 2017 labor reform.

He exemplifies this by showing that some results have already been collected last year, with a net opening of 84,200 jobs in the intermittent modality and another 30,800 in the part-time regime.

The consultancy’s scenario for the new government contemplates the non-reversal of the good agendas forwarded since 2016 in the microeconomic scope.

“The assessment is that, although there are risks of setbacks – as in intermittent work and outsourcing issues -there are also elements of containment, given the movements of the financial market and the very heterogeneity of the government’s support base,” he says.

With information from Gazeta do Povo