Unemployment decline expected to slow down until the turn of the year

In a scenario of reopening of activities and stimulus to the economy on the eve of the elections, the unemployment rate tends to remain low at the beginning of the second semester in Brazil, forecast analysts.

However, according to them, the recovery should lose strength over the months, and the indicator may rise again at the turn of the year, under the effect of higher interest rates and possible uncertainties related to the country’s political future.

In the second quarter, the unemployment rate dropped to 9.3%, informed this Friday (29) the IBGE (Brazilian Institute of Geography and Statistics). It is the lowest level for the period since 2015. At the time, the indicator was at 8.4%, and the economy was going through a recession.

The fall was driven by the creation of job vacancies, which still mirrors the effects of the reopening of economic activities after the restrictions in the pandemic, assess analysts.

With the elections approaching, the Jair Bolsonaro (PL) government is betting on the release of additional resources, such as the increase in Auxílio Brasil to R$ 600, to try to stimulate the resumption.

This, in the view of experts, can postpone the slowdown in the economy and help the job market during the electoral race.

The point, they say, is that the breath shouldn’t be that long. By the end of 2022, a stronger effect of interest rate hikes on economic activity is expected.

The political uncertainties associated with the outcome of the elections and the worsening of the global economy emerge as complicating factors at the turn of the year. In 2023, projections indicate a lower performance of the national economy.

“We imagine an improvement in unemployment in the coming months, but at a slower pace”, says economist Rodolpho Tobler, a researcher at FGV Ibre (Brazilian Institute of Economics of Fundação Getulio Vargas).

“At the turn of 2022 to 2023, we may even have some increase in the rate, because we are postponing the deceleration of economic activity”, he adds.

Economist Eduardo Vilarim, from Banco Original, makes a similar assessment. According to him, the tendency is for unemployment to fall again at the beginning of the second semester, but with the reaction slowing down until the end of the year.

The Original predicts an unemployment rate of 9% in the fourth quarter of 2022 and 9.4% in the three months ending in January 2023.

“The labor market has lagged movements. After the reopening of the economy, the service sector was the last to move towards a more positive performance [na geração de empregos]”, he explains.

“In the second half, the higher interest rate should impact economic activity more”, he adds.

Economist João Beck, a partner at the investment firm BRA, also sees room for a reduction in unemployment in the short term. However, he says that the movement is not about a “sustainable fall”.

In this sense, Beck draws attention to the possible exhaustion of the impacts of the reopening of the economy, in addition to the worsening of the global macroeconomic scenario, which brings threats to Brazil.

“We can still have positive, delayed effects on the job market, but at some point the situation will change. It could be in the fourth quarter of the year or early next year”, he points out.

Sergio Vale, chief economist at MB Associados, follows the same line.

“The scenario is of lower unemployment in the short term, but it tends to have a small reversal until 2023 with higher interest rates, not to mention that the fourth quarter of this year should be very noisy due to the elections. It is a reversal scenario, but nothing as dramatic as we’ve seen before”, analyzes Vale.

He sees the possibility of further declines in the unemployment rate in the quarters ending in July and August. However, until December, MB’s forecast is for a higher indicator, 9.9%.

“We have a very complex scenario from the political and fiscal point of view. These uncertainties reverberate for the next year”, says Vale.

According to the IBGE, the number of unemployed in Brazil dropped to 10.1 million in the April-June quarter. The contingent was at 11.9 million in the initial three months of 2022.

“The numbers released today [sexta] confirm our expectation of a positive first semester in terms of job creation”, said in a report the economist Claudia Moreno, from C6 Bank.

“Going forward, we believe that unemployment will continue to fall until the end of the year, closing 2022 with a rate of 8.7% [no trimestre até dezembro, com ajuste sazonal]and will rise again next year, due to the greater impact of high interest rates and the expectation of a global slowdown”, he added.