Brazil's Jobless Rate Hits Record Low

SAO PAULO/BRASILIA (Reuters) – Brazil's jobless rate has reached a new record low in the three months ending November, as per official data released on Friday. However, job creation has slowed to its lowest pace in nearly a year, indicating some cooling signs in the labor market.

In Latin America's largest economy, the unemployment rate was recorded at 6.1% for the September-November period, according to the statistics agency IBGE. This is the lowest rate in the current data series, which dates back to 2012.

The figure aligns with expectations from a Reuters poll and is a decrease from the 6.6% rate in the previous quarter. Over the past year, Brazil's unemployment rate has hovered around historically low levels, demonstrating persistent strength. This has been a source of praise for the government, albeit raising inflationary concerns.

The tight labor market has influenced the central bank's decision to accelerate interest rate hikes, exemplified by a larger-than-expected 100 basis-point increase to 12.25% in December, with plans for similar hikes in the upcoming meetings.

On a positive note for the bank in its efforts to manage rising inflation, the latest monthly job creation figures fell short of market expectations, reaching their lowest level since December 2023. Labor ministry data indicated that Brazil created a net 106,625 formal jobs in November, under the expectation of 129,500 and marking the lowest intake for that month since the series began in 2020.

Rafaela Vitoria, chief economist at lender Inter, remarked that "the labor market data indicate accommodation, which is good news for the Copom," referencing the central bank's interest rate-setting committee.

She continued, highlighting that a slowdown in activity could aid in mitigating price transfers due to recent foreign exchange rate depreciation, thus preventing inflation from rising further. Additionally, the average real wages showed a 3.4% year-on-year increase in the latest IBGE reading, a deceleration from the 3.9% increase noted in the previous rolling quarter.