Brazil’s job market recovery brought down to earth

After a booming stretch, Brazil’s recovering job market seems to have settled into a more normal groove. According to new data from the Labor Ministry, the Brazilian economy added 1.48 million formal jobs in 2023. 

The numbers are significantly lower than the government’s target — which was to record at least 2 million new positions — and marks a second straight year of a slowdown after a massive hike in 2021, when the economy began recovering from the pandemic downturn.

As usual, the services sector was the most labor-intensive — creating 886,200 net new formal jobs, or 60 percent of all new positions opened in 2023. The sector accounts for half of Brazil’s formal jobs and about 70 percent of the country’s gross domestic product. Next comes commerce (276,528 jobs), civil construction (158,940), industry (127,145) and agriculture (34,762).

The good news is that the average salary of formal workers ended 2023 at BRL 2,026.33 (USD 408), up BRL 40.17, or 2 percent, from a year ago. 

In a press conference this afternoon, Labor Minister Luiz Marinho once again highlighted high interest rates as the biggest impediment to the growth of the formal labor market. 

Between March 2021 and August 2023, the Brazilian Central Bank staged one of the world’s most aggressive monetary tightening drives, raising benchmark rates from 2 to 13.75 percent. In recent meetings, the bank has slashed the policy rate to 11.75 percent, and a half-percentage point cut is expected for this year. 

If the pace of new job creation continues to fall, however, it could slow down household consumption, an important driver of Brazilian GDP. Analysts from the Brazilian Institute of Economics at the think tank Fundação Getulio Vargas believe that the positive effects of the monetary easing, such as debt reduction for medium and small companies, will take time to appear, and that 2024 will probably be a tepid year in terms of employment.

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