Reversal of Unemployment and Caution in the Credit Market

BRAZIL ECONOMICS - Report 29 Sep 2014 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

For an extended period the unemployment rate measured by the Monthly Employment Survey (PME, covering six metropolitan regions) was only moving in one direction – downward. However, the most recent data indicate a reversal. The participation rate appears to have stopped falling, contributing to a rise in unemployment, a fact that was clearly indicated in previous months by the behavior of the occupied population. The now-clear weakening of the labor market works to discourage household consumption in two ways. First it reduces both the growth of current income and expected future income, and second it deters expansion of credit.

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