Labor Ministry data shows that Brazil created 180,395 formal jobs in January, practically double the number posted a year earlier (90,031). The services (80,587 vacancies) and industrial (67,029) sectors boosted these hirings, reinforcing economists’ and analysts’ views that the country’s job market may show more resilience than expected.
“All regions of the country are hiring more. Furthermore, the average salary of those hired has also risen, which means that not only are there more opportunities, but they are better,” says André Colares, partner at Smart House Investments. The average hiring salary stood at BRL 2,118 (USD 424.30) in January, an increase of 3.38 percent compared to December.
Brazil’s formal job market now represents more than half of hired workers, an expansion of 0.39 percent compared to the previous month. This is important because formal jobs generate greater stability and better conditions for income growth.
However, there is also a negative side to these statistics. As members of the Central Bank’s Monetary Policy Committee (Copom) gather for another meeting, a buoyant job market is also seen as a warning sign regarding inflation.
As Copom itself described in the minutes of previous meetings, its members are paying attention to the so-called gross product gap — the difference between the country’s actual activity and its potential GDP, or the space that the Brazilian economy has to grow until it reaches its maximum capacity and begins to generate inflationary pressure.
Variables such as the pace of the job creation and real income dynamics are important in this monitoring as they could potentially slow down inflation convergence, notably impacting inflation in services and more labor-intensive sectors. This would lead Copom to reduce the pace of cuts.
Volnei Eyng, economist and CEO of asset manager Multiplike, believes that this data, combined with higher-than-expected inflation at the beginning of this year, will make Copom withdraw its guidance for new cuts of half a percentage point, adopting “greater caution in reducing interest rates to control inflation.” Still, he expects another reduction of this magnitude tomorrow, when the Selic will probably be reduced to 10.75 percent.
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