IPEA: Brazil unemployment dropped to 13.7% in June; gains led by informal sector

RIO DE JANEIRO, BRAZIL – Unemployment dropped to 13.7% in June, the last month of the moving quarter begun in April. The percentage was reached after standing at 15.1% in March. The seasonally adjusted unemployment rate, which excludes the effects of seasonal variations from June’s set of temporal data (13.8%), is the lowest since May 2020.

The numbers are part of the study released yesterday, September 27, in Rio de Janeiro, by the Institute for Applied Economic Research (IPEA).

It analyzed the recent labor market performance, based on the breakdown of the mobile quarters of the Brazilian Institute of Geography and Statistics (IBGE)’s National Household Sample Survey (PNAD Contínua) and on the Ministry of the Economy’s New General Register of Employed and Unemployed (CAGED).

IPEA’s survey also showed that the recent growth in new hires has occurred mainly in sectors that employ relatively more informal labor. Among them are construction, which posted an annual increase in the employed population of 19.6%, agriculture (11.8%), and domestic services (9%).

“There has been an improvement. It is something that we were starting to see at the beginning of the second quarter. Unemployment is dropping because occupation is growing. Occupation is recovering and we are achieving a reduction in unemployment in the context of growing EAP [Economically Active Population].

“All those people who left the job market because of the pandemic are coming back to look for work. Even with this population returning, we are still managing to reduce unemployment because occupation is rising,” said IPEA’s researcher Maria Andréia Lameiras.

Another finding in the survey is that in the second quarter of 2021, in a year-on-year comparison, the increase in employees in the private sector without a labor contract reached 16%, and that of self-employed workers reached 14.7%.

Also based on PNAD data, the increase in employment in the second quarter was spread across all segments of the population, when compared to the same period last year, but the growth in employment among women (2.2%), young people (11.8%), and workers with complete secondary education (7%) was noteworthy.

A DIFFICULT SCENARIO

However, Maria Andréia pointed out that despite the positive results, some important indicators show that other aspects of the Brazilian labor market remain at unfavorable levels.

She stressed that the rise in occupation has occurred very much on top of informality, which is not surprising because it was the most affected sector by the pandemic. “They are the ones who are coming back. We see large growth in informal employment and self-employment,” she said.

She added that despite the slight drop in discouragement, there is still a high level of underemployment. “These people are returning to the labor market, but not in the conditions that they would like to be. There is a large portion of the population that can offer labor, but is not finding a place,” she explained.

In addition, there is a concerning fact, which is the increase in the length of time people remain unemployed. The transition microdata extracted from the PNAD Continuous Survey for IPEA’s survey indicated that the percentage of unemployed workers, who had been unemployed for 2 consecutive quarters, rose from 47.3% in the first quarter of 2020 to 73.2% in the second quarter of 2021.

The situation is aggravated by the decline in the portion of the unemployed who found a job in the subsequent quarter from 26.1% to 17.8% in the same period.

“The population that has been looking for work for over 2 years has suffered greatly and this is bad because there is extensive labor market literature that shows that the longer people remain out of work, the more difficult it is to re-enter the labor market. When someone has just lost a job, he or she has close contacts and it is easier to relocate.

“The longer they stay out of work, they lose productivity and don’t know what is new in their profession. It becomes more and more difficult for people to come back and they become obsolete,” she noted.

Pandemic

According to the researcher, it is not possible to say that this negative labor market scenario is only the pandemic’s fault, because the situation was not good before: “We were starting to improve, but when the pandemic came, we still had a high unemployment rate and high discouragement. The pandemic aggravates a situation that was not good before. So much so that, when we start to look at occupation, it is returning to the pre-pandemic level and it is not a situation that was comfortable at that time. Although it is returning to what it was before the pandemic, it is not enough to say that we have a reasonably good labor market,” she said.

Perspectives

According to Maria Andréia, the labor market is expected to continue improving, with a growth in occupation, albeit still with informal jobs. “Services will drive the economy in the coming months and they are intensive in informal labor. We will continue to see an improvement in occupation, but still very much based on informality. Although the CAGED data have shown a better scenario for formal employment, it shows that we have already surpassed the contingent of formal market workers at the start of the pandemic, but the PNAD has not yet shown this. Through the PNAD, we will still see the labor market driven by informal jobs, with an unemployment rate slowing down,” she said.

The researcher believes that unless the emergency aid, scheduled to end in October, is extended, beneficiaries will have to return to the labor market without this income, thereby exerting pressure on the indicators. This will only be reduced if the creation of new jobs is higher than the number of people trying to return to the labor market once the benefit ends. She says that this is currently the case, with the country managing to generate more jobs than the amount of people returning to the market.

“Therefore, unemployment is dropping, but it is dropping very slightly and it will continue to drop at a very slow pace because of the pressure from the labor force coming back to the market. The pace of job creation must be much higher, because it must generate jobs to hire people who are currently unemployed and also to include people who are leaving inactivity and entering the job market as unemployed,” she said.

Emergency aid

According to Maria Andréia, should the emergency aid be maintained, this may result in some decompression in the Economically Active Population (EAP). “Even so, the EAP will still be growing, but in a slightly milder way, and the return to the job market may be delayed for 2 or 3 months, bearing in mind that even if it is reduced, we will still have a high unemployment rate, because there is still a contingent of unemployed workers, informal jobs without any kind of protection and who are not contributing to Social Security,” she said, adding that informal jobs are ultimately reflected in consumption, because workers in this situation will not take risks to buy durable consumer goods, for instance.

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