By Ben Tavener, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – Unemployment in April fell for the first time since December 2011 to six percent, a record low for the month, figures recently released by the Brazilian Institute of Geography and Statistics (IBGE) have revealed. The rate of joblessness in Brazil fell from 6.2 percent in March 2012; the figure for last year in April 2011 was 6.4 percent. Yet at the same time wages also fell for the first time in six months.

The IBGE's Cizar Azeredo says figures about the drop in wages are more worrying, Brazil News
The IBGE's Cizar Azeredo says figures about the drop in the average salary in Brazil are more worrying, photo by Divulgação.

Cimar Azeredo, who is responsible for the IBGE’s employment statistics, says the figures show “signs that the dismissal of temporary workers has stopped,” and that although the unemployment normally starts to fall from this time of the year on, figures showing a drop in average salaries were more telling – and might have real implications for Brazil’s economy.

Six metropolitan regions are included in the figures, including Rio de Janeiro. Experts say the unemployment figures show the country’s labor market remains tight, and are putting the drop down to an increase in hiring due to industry conditions, and a reduction in seasonal holiday workers being fired due to the time of year.

“Large companies in particular are now hiring more, and this is in part due to high turnover in these more specialized industries caused by a lack of specialized technical professionals,” says Luiz Esteves, Professor of Economics at UFPR.

Speaking to The Rio Times, he says Brazil’s labor market remains heated due to domestic demand: “The reduction in interest rates, the expansion of credit and consumption, growing household debts and government investment in infrastructure works (several of them related to the World Cup and the Olympics) have all ratcheted up the rate of job creation.”

“This is evident not only in the employment figures, but also in the data we are getting on real wage increases reached by collective bargaining. In 2010, we were talking about an average salary increase of Brazil’s National Consumer Price Index (INPC) plus 1.0 percent (real increase) through collective bargaining. Today, it’s INPC plus 3.5 percent,” he said.

Brazil unemployment chart, graphic by The Rio Times
Brazil's unemployment dropped in April 2012 for the first time since December 2011, image by The Rio Times.

Professor Esteves cites a recent example from his study city, Curitiba in Paraná, where workers at a Volvo plant went on strike earlier in May and negotiated a doubling of workers’ profit-sharing from R$12,500 to R$25,000.

The IBGE has said the drop in the rate of joblessness is in itself fairly insignificant statistically, but that the first drop in the average monthly salary in six months, which decreased 1.2 percent in April compared with March 2012, was more significant, and could possibly provide an early warning of more sluggish behavior to come from Brazil’s economy.

This is despite the government’s attempts to boost growth – through record-low interest rates, reduced taxes and increased access to credit. But others have highlighted that the average wage has increased 6.2 percent in April year-on-year to R$1,719.50 (US$865) per month.

Newton Rosa, from SulAmerica Investimentos, said this long-term rise in wages may affect the economy in other ways: “[Rising wages] may keep the pressure on service prices, limiting a drop in the inflation rate. This may limit the room for bigger interest rate cuts,” she told Bloomberg.

Brazil’s economy has been growing more slowly than expected, despite the Central Bank cutting interest rates to near record low. Analysts predicted Brazil’s key SELIC interest rate would be cut for a seventh time in a row this week – to buoy the economy and offset the slump in demand from China for Brazil’s commodities and the debt crisis in Europe.


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