Brazil & Southern Cone - December 2011 (ISSN 1741-4431)

The Brazilian economy will continue to create new jobs into 2012. Notably, the stagnant 2011 third quarter did not lead to an increase in unemployment.

Indeed, Brazil now attracts thousands of foreign professionals. According to the labour ministry, in the first half of 2011 the number of foreigners legally working in Brazil increased 20% year-on-year. The ministry granted 26,545 work permits in the first half, meaning that 55,952 foreigners are now legally working in Brazil. Most foreigners working in Brazil either have a graduate degree or a degree plus a professional qualification.

The unemployment rate in Brazil dipped in October to 5.8% from 6% in September, on official figures from the Ibge. This was the lowest October rate since 2002. Average wages (discounted for inflation) were flat at R$1,612 (US$870) for the month. Usually, full employment would start to push up wages rapidly but so far this has not happened in Brazil. The main reason for this is probably the knowledge that real minimum wages will rise by about 7.5% (inflation adjusted) in 2012. This is the result of the strong GDP growth in 2010 and the comparatively high inflation of 2011. This knowledge is tempered by clear signs that jobs are becoming harder to find in the industrial sector. Even so, according to the Ibge, the number of Brazilians with jobs in the six major metropolitan areas edged up 0.14% to 22.68m. This was up 1.5% on October 2010.

Industrial employment is beginning to fall, in line with a weakening industrial sector. In October the number of people working in industry fell by 0.4% over September. Year-on-year, there was also a fall (of 0.3%), the first year-on-year fall since January 2010. Even so, the number of people employed in the industrial sector has increased by 1.3% since January 2011.

Significantly, the annual rate of growth in industrial employment dropped to 1.6% in October, from 3.9% in February. It is also worth noting that São Paulo, the country’s industrial heartland, has borne the brunt of the slowdown. The worst hit industries in São Paulo are rubber and plastics in which employment is 12% lower than it was in October 2010. Printing (down 8%) and metal-bashing (down 6%) have also been hard-hit. The leather industry across the country is also in trouble, but this seems to be more a result of fewer cattle being slaughtered than anything else.

São Paulo has also seen a drop in the number of hours worked in the industrial sector. In October the figure was down by 0.9% overall, but metal bashing workers saw their average hours drop by 10%. It is also worth noting that on the Ibge data, the job situation in Paraná (where the number of people employed in industry is up 5.5%), Minas Gerais (up 3.1%) and the centre-northwest (3.2%) is better than in São Paulo. Besides São Paulo, the industrial sector has laid-off people in Ceará and Espírito Santo.

As we have noted before, productivity is probably improving because despite the overvaluation of the Real, Brazil’s exports increased by a third in 2010. Some, but by no means all, of this was due to higher commodity prices (especially soya and iron ore); but a lot of the increase is due to Brazil’s integration with global supply chains, particularly in the automotive sector