Brazil, the world’s 12th largest economy posted record unemployment data on Friday.
According to data from IBGE (The Brazilian Institute of Geography and Statistics), the number of Brazilians registered unemployed as well as the national unemployment rate increased to the highest since IBGE’s recording began in 2012.
The unemployment rate in the three months through September increased to a record 14.6% from the 14.4% posted in the three months to August. Meanwhile, the number of Brazilians officially unemployed increased to a record 14.1 million from 13.8 million.
However, despite the seriousness of such a large number of people unemployed in Latin America’s strongest economy, there is good reason, in fact three good reasons, that Brazil’s record unemployment is not a cause for panic,
The Brazil Unemployment Figures are Not as Bad as They Look
The unemployment rate in Brazil at 14.6% was actually lower than the 14.9% economists had expected. This means that the latest figures were bad, but they could have been and were expected to be, worse
Again, there is much to be disheartened about the latest Brazilian unemployment figures. More than 1.3 million persons were unemployed in Brazil in the third quarter compared to the second quarter. However, the 96.5 million people in the workforce was 1 million higher than the three months through August.
Another reason not to panic over the figures is that there were increases in employment in the construction sectors, two big employment sectors. In construction, the increase was 7.5% and in agriculture, the increase was 3.8%.
An End to the COVID Factor
Brazil has been one of the hardest-hit countries from the global coronavirus pandemic. According to the latest World Health Organisation’s figures, there have been 6,166,606 confirmed COVID-19 cases and 170,769. This ranks Brazil as the third-worst affected in the world, after the US and India.
COVID played an important factor in Brazilian unemployment, IBGE research manager Adriana Beringuy said:
“In April and May, social distancing measures influenced people’s decision not to look for work. With the relaxation of these measures, we have started to see more of these people looking for a job,”
Despite no obvious immediate end to the coronavirus, global vaccines are expected to be rolled out in 2021. This will mean economies will be restarted and the situation should improve. Brazil will benefit, even if Brazil’s Bolsonaro has said he himself will not take the coronavirus vaccine.
The Brazilian Economic Recovery
The final reason for calm over the latest Brazilian unemployment figures is the Brazilian economy itself.
Brazil is in an economic recovery. Economists recently raised their growth forecast for the Brazilian economy for this year and the next. Economy Minister Paulo Guedes is on record of saying that the Brazilian economy is in a ‘V-shaped’ recovery and could increase by as much as 4% in 2021.
Evidence of Brazil’s economy’s recovery and that the central bank’s steps to loosen financial conditions are working can also be seen in loan defaults in Brazil falling to historic lows in October.
Key indicators of household and business loan defaults were at their lowest since the central bank’s data recorded started in 2011.
To negate the impact of COVID, over 1.2 trillion reais worth of credit and liquidity to businesses, banks and financial markets has been made available by the Central Bank. Tens of millions of Brazil’s poorest people have also received direct cash transfers from the government, all of which appear to boosting the Brazilian economy and staving off loan defaults, at a key time.
The COVID-19 Factor…Again
How Brazil reacts to the latest surge in infections could be key as to what happens to the Brazilian economy and whether or not to panic over the latest Brazilian unemployment data.
Infections are on the increase. Despite heavy criticism of his handling of the coronavirus, Brazil’s president Bolsonaro’s COVID-19 actions make him a hero to some.
The next few months will tell if we should be right to not panic now over the latest unemployment data from Brazil.
