UPDATE 1-Brazil's 2012 job creation lowest in a decade

Fri Jan 25, 2013 2:22pm EST

Related Topics

* Brazil adds 1.3 million jobs in 2012 vs 2 million in 2011

* Mining, manufacturing and services hire fewer workers

* Unemployment low despite economic slowdown

By Luciana Otoni

BRASILIA, Jan 25 (Reuters) - The once-booming Brazilian economy created the fewest new jobs in a decade during 2012 as struggling manufacturing industries and mining companies hired fewer workers, according to labor ministry data released on Friday.

The world's sixth-largest economy added 1.3 million payroll jobs last year, the worst result since 2003 and way below the 2 million jobs created in 2011.

Facing lower commodity prices and heated competition from abroad, Brazilian mines, steel mills and makers of goods like shoes and beverages created fewer jobs last year.

The service sector, which has been the bright spot of lackluster Brazilian economy, also added fewer jobs last year.

Even as the pace of formal job creation slowed, unemployment remains at a record low in Brazil, a disparity that some economists say is due to the way the data is collected.

The national statistics agency IBGE includes both formal and informal jobs in its calculation of the unemployment rate while the labor ministry collects data from businesses that have workers legally registered. Informal jobs range from self-employed accountants to small business owners.

Record low unemployment remains a paradox in a country that has experienced two years of painfully slow economic growth. The Brazilian economy grew about 1 percent in 2012, a far cry from the red-hot 7.5 percent expansion seen in 2010.

Almost full employment and rising wages have helped President Dilma Rousseff remain immensely popular even as she struggles to reignite solid growth with a barrage of tax cuts and cheap credit.

The labor ministry predicts that Brazil will create more than 2 million new jobs in 2013 as the economy picks up steam.

Economists say strict labor regulation makes it very difficult and costly to fire workers, forcing companies to keep employees on their payroll as they wait for the economy to improve.

Brazil's jobless rate fell more than expected to 4.9 percent in November and edged closer to an all-time low, an enviable position compared to developed nations hit by global slowdown. In Spain, unemployment hit an all-time high of a 26 percent in the fourth quarter, leaving 6 million people without a job at the end of last year

Brazil could still face problems if the slow recovery from near recession in 2011 does not speed up this year. The economy shed a more-then-expected 497,000 jobs in December, compared to 408,172 jobs lost in December of 2011.

Companies tend to fire temporary workers in December after increasing production before the Christmas holidays.

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