Brazil Flash Report: Unemployment rate falls but salaries keep depressed

Brazil unemployment rate falled in August to 13.2 % (13 % if seasonally adjusted), the lowest since the coronavirus outbreak but far from its pre-pandemic level (11.2 %). All the sectors registered positive creation of employments, however, total employment reached 90 Millions, 5 % behind its pre-pandemic level (94 Million).

The reopening of the Services sector alongside the high level of vaccinated population and the pandemic control are the main drivers behind the fall in the unemployment rate. However, we alert that the salaries kept depressed, thus, the reduction of government transfer alongside the rise of inflation will constrain the consumption recovery in the short term.

While the economy continues to fully reopen there is still some margin for the unemployment rate to fall, however, we believe that full recovery from the pandemic will not be reached completely. As demand fell, many sectors will not be able to fully recover, therefore, unemployment rate should stabilize at a higher level. Moreover, Central Bank will tight the monetary cycle which soon will reflect in lower credit operations. We believe unemployment rate will finish 2021 at 12.5 %, and it will stabilize around 12 % during 2022.