Brazil’s real wages rise: 8.8% more than last November to offset losses from pandemic

Real wages in Brazil have recovered from the shock of the pandemic and are approaching the highest levels in the country’s history. The wage recovery is occurring at the same time that inflation is collapsing.

The Brazilian Central Bank’s standardized statistical series confirm that the labor market recovery continues at an unprecedented pace.

The real wage bill for all workers increased by 1.24% in August, bringing the uninterrupted growth to 10 months.

This indicator combines the real wage level for the average number of jobs and the actual number of workers receiving those wages.

Real incomes have increased by 8.8% since November last year and 2.34% since Jair Bolsonaro took office.

The corresponding increase in average real wages in Brazil reached 8.34% between November 2021 and August 2022, while the “employment effect” was also significant, with seasonally adjusted unemployment falling from 12.2% to 8.8% in the same period.

The number of unemployed fell from 12.95 million to 9.69 million between October 2021 and August this year.

After the shock caused by the pandemic in March 2020, real wages temporarily increased (as in countries such as the United States).

Still, real wages fell until October 2021 due to the sharp increase in unemployment.

From November onward, a recovery process began that is on track to surpass the record levels of 2019.

Most of the real wage recovery took place from April 2022, as the economic program gradually reduced the monthly inflation rate until it was eliminated in July.

The legal guarantee of the monetary authority’s independence became a critical factor in Bolsonaro’s economic program.

At the same time, Economy Minister Paulo Guedes eliminated the risks of “fiscal domination” and achieved a primary surplus in public budgets for the first time since 2014.

In March of this year, prices rose by as much as 1.62%, and after maintaining fiscal and monetary discipline, the average monthly inflation rate between April and September reached only 0.01%.

The monthly GDP proxy, measured by the Brazilian Central Bank’s IBC-Br index, registered a strong growth of 5.2% between October last year and July this year.

The strong momentum of economic activity led to a recovery in employment, which occurred despite the deflationary trend and the increase in the SELIC’s monetary policy interest rate.