‘Doubt is whether recovery in V continues’, says José Márcio Camargo

Contrary to what might appear in a preliminary assessment, the -0.1% drop in GDP (Gross Domestic Product) in the third quarter points to a faster recovery than expected, according to an assessment by the chief economist of Genial Investimentos, José Márcio Camargo.

For him, the services sector should continue to react over the next year, if the pandemic is under control in the country.

Is the stagnation in recent quarters a sign of difficulties in 2022? If we look at the GDP result, it is stagnant. But if we consider the most job-generating part of GDP, it grows robustly. I don’t know if it has a name for it, but the question that is difficult to answer is what will happen in 2022. This fundamentally depends on the behavior of the pandemic.

If we have a further reduction in the number of deaths and cases, the services sector will continue to grow and this will be positive for GDP growth in 2022. In case of reversal in the behavior of the pandemic, if we have to carry out new lockdowns, this will impact the recovery of services, especially those related to food and travel.

Did the recovery in ‘V’ happen, as the Economy Minister Paulo Guedes predicted? The ‘V’ recovery has happened, the question is whether it will continue. We have practically recovered the level of GDP and few people were predicting the return of GDP in such a short time. Inflation can be harmful. If it continues accelerating, it will generate a drop in wages, with a reduction in demand and growth.

If this speed is surprising, what makes the level of confidence in the economy lower now than it was three months ago? It is paradoxical, we had two consecutive falls in GDP (from -0.4% in the second quarter and -0.1% in the third), some call this a technical recession. But it is curious, because when looking at the labor market data, it is dynamically generating jobs. Unemployment went from close to 15% in the first quarter to below 13% in September, despite supposedly we are in a technical recession.

But the recovery of jobs, for example, does not occur with a drop in income? Yes, but most of the fall in income is linked to the fact that the sectors that are generating jobs (such as construction and other services) are intensive in low-skilled labor, with lower-than-average wages. As the new jobs created are concentrated in these sectors, the average wage in the economy ends up falling. So much so, that the wage bill is basically stable, the value of wages based on the total number of jobs created has not changed much.

X-RAY

José Márcio Camargo, 74

Doctor in economics from MIT (Massachusetts Institute of Technology) and graduated in economics from the Federal University of Minas Gerais, he was a professor at the Department of Economics at PUC-Rio and is chief economist at Genial Investimentos​