UPDATE 2-Brazil's jobless at record low despite weakened economy

Thu Jan 31, 2013 8:50am EST

* Unemployment dropped to 4.6 percent at end of 2012
    * Separate data show payroll job growth is slowing
    * Real wages fell 0.9 pct in December from November


    By Silvio Cascione
    SAO PAULO, Jan 31 (Reuters) - Brazil's unemployment rate
dropped to a record low in December as expected, underpinning a
timid economic recovery and renewing concerns about inflation.
    The jobless rate fell to a
non-seasonally-adjusted 4.6 percent from 4.9 percent in
November, government statistics agency IBGE said on Thursday.
    December's unemployment rate was above the median forecast
of 4.4 percent in a Reuters survey of 27 economists.
Nevertheless, it was the lowest reading for the indicator since
the current data series was introduced in 2002. 
    In December 2011, Brazil's jobless rate was 4.7 percent.
    A strong labor market is crucial for Brazil's ambitions to
at least triple its growth rate from a mediocre 1.0 percent
estimated for last year. But the tight supply of workers in some
areas has also fuelled inflation, creating a dilemma for the
central bank as it tries to keep interest rates at record lows.
    "The economy will only recover if consumer spending keeps
growing, and that depends on employment, income and confidence,"
said Mauro Schneider, an economist at CGD Securities in Sao
Paulo. "Right now, we have good prospects for the first two." 
    "But the number also means that we shouldn't see services
inflation slowing," Schneider said.
    Services inflation rose more than 8 percent last year, way
above the headline inflation rate of 5.8 percent, according to
the IPCA benchmark index.
    The central bank cut interest rates ten straight times until
October 2011 to jump-start the economy, but has faced growing
criticism as inflation drifts towards the top-end of its target
at 6.5 percent. Most economists still expect the benchmark
interest rate to remain stable this year, at 7.25 percent.
    Unemployment dropped even after payroll job growth declined
to its slowest pace since 2003. Last Friday, the labor ministry
said 1.3 million jobs were added last year. Its data showed that
Brazilian employers shed a more-than-expected 497,000 jobs
 in December. 
    Taken together, both the Reuters poll and government data
suggest that the pace of payroll job creation in 2012, albeit
slower, offset the entry of new workers in the labor market. The
labor ministry forecasts that 2 million new jobs will be created
this year as the economy picks up steam.
    Analysts also say that different methodologies help explain
the contrast between both surveys. The unemployment rate, as
calculated by the IBGE, tallies jobs in the formal sector, where
employers are legally registered, as well as off-the books jobs
in the so-called informal sector.
    On the other hand, the labor ministry's nationwide payroll
collection is based on a survey of only legally registered, or
"formal sector," employers. 
    
    The IBGE report showed that the number of Brazilians with
jobs in the six major metropolitan areas remained practically
unchanged from November at 23.4 million people, up 3.1 percent
from a year earlier.
    The number of people who unsuccessfully looked for work fell
6 percent from November and remained unchanged from a year
earlier at 1.1 million.
    The report also showed some signs of moderation in the job
market, though. Real wages, or salaries discounted for
inflation, fell 0.9 percent from November to an average of
1,805.00 reais ($912) a month. They rose 3.2 percent from the
year-earlier period.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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