Labor Market: Recent signs and trends

BRAZIL ECONOMICS - Report 24 Aug 2020 by Affonso Pastore, Cristina Pinotti, Paula Magalhães, Marcelo Gazzano and Bruno Cordeiro

Last week, the CAGED data indicated net creation of 133 thousand jobs (seasonally adjusted), when the expectation of the market was the creation of only 18 thousand. A gap of this magnitude between the forecast and the actual figure in the formal job market is not only a consequence of uncertainty over the intensity of the recession and the speed of the recovery, but also lack of knowledge about how the pandemic has altered the degree of formalization in the job market and how it affects different sectors (for example, the CAGED numbers point to much greater net hiring of formal workers in civil construction than in commerce). Before the pandemic, the slow recovery of the economy had reduced the unemployment rate measured by the Continuous PNAD to 11.4%, a level that now stands at 13.1%, but with a huge decline in the participation rate. In this report, we start with a snapshot of the current labor market, in which the lower participation rate indicates a significant rise of the jobless rate. We also analyze the possible effects of worker discouragement on the participation rate; the explanation for the divergence between the net gain in formal jobs indicated by the Continuous PNAD survey of the IBGE and the CAGED data gleaned by the Secretary of Labor; and finish by stressing that even before the pandemic, the country was experiencing a period of high unemployment, causing a loss of worker qualification levels with negative effects on average labor productivity and potential GDP.

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