Brazil: unemployment closed below projections and confidence in the service sector is strengthening

Brazil closed the Quarter August-October with a 14.3% unemployment, according to data from Brazilian Institute of Geography and Statistics (IBGE). While it is a 0.5% increase compared to the period between May and July, the updated number indicates a slight fall compared to the moving quarter that ended in September (14.6%) and is approximately below consultant expectations, between 14.7% and 14.8%.

Another piece of information that points to recovery is the Growth of 2.8% of employed persons, which represents the integration of 2.3 million into the Brazilian labor market (84.3 million).

In this sense, the occupancy rate (48%) increased by 0.9% compared to the previous quarter. The sectors that led the increase were agriculture, animal husbandry, forestry production, fishing and aquaculture (3.8%); industry (3.0%); construction (10.7%); trade and repair of motor vehicles (4.4%).

However, unemployment levels are still higher than before pandemic (there is a growth of almost 3 percentage points compared to the same quarter of 2019) and informality is reaching the 38.8% of the employed population (32.7 million informal workers), while in the previous quarter, it was 37.4%.

On the other hand, Getulio Vargas Foundation (FGV) also today released the results of service sector confidence index, which represents around 70% of Brazil’s GDP. In December, industry confidence increased by 0.8 point and this is the first increase in three months.

“Although favorable, caution is in order because consumers are still quite afraid of a increased number of cases [de coronavirus] and the uncertainty concerning the arrival of vaccine in Brazil “, He said economist Rodolpho Tobler of the FGV. “The outlook for the coming months is that the recovery will continue, but there is still a long way to go to return to the prepandemic levelsTobler added.

While the index is still far from prepandemic levels (in February it had reached 94.4 points while at the end of the year it was 86.6), services are a key sector to support the economic growth and its recovery has been slower than that of other activities such as manufacturing and industry, so the slight upturn in confidence is raising expectations in the market.