UPDATE 2-Brazil economy sheds most jobs in 10 years in Dec

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By Ana Nicolaci da Costa

BRASILIA, Jan 19 (Reuters) - Brazil's economy shed the most amount of formal jobs in nearly 10 years in December as the global financial crisis took a toll on Latin America's biggest economy.

The economy cut 654,946 formal jobs in December, the worst loss since May 1999 and more than double the 319,414 jobs cut in December 2007, government data showed on Monday.

The figure was higher than the 600,000 job losses predicted by President Luiz Inacio Lula da Silva last week and more than double the 300,000 considered normal for the month of December because of seasonal factors.

"Obviously, this is already the result of the crisis," Labor Minister Carlos Lupi said at a news conference. The total stock of formal jobs in the country now stood above 30 million, he said.

Brazil's economy had been growing rapidly in recent years but a global financial crisis is now hurting several industries which have started to lay off workers and cut investments.

The bulk of the job cuts came in industry, services, agriculture and the construction sectors, with the latter two especially hard-hit by the scarcity of liquidity resulting from the global credit crisis, Lupi said.

"I thought it was bad because it was very spread out. I had imagined (the job cuts) would have been concentrated in certain industrial sectors," said Zeina Latif, chief Brazil economist at ING in Sao Paulo.

The government has already moved to help industries by granting tax breaks to banks, automakers, construction firms and airlines, while the central bank reduced banks' reserve requirements to free up funds for lending.

Lula said recently the government would announce economic measures this month to prevent more job cuts and avert a major slowdown in Brazil. Business leaders and union officials have also met to try to come up with alternatives to job cuts as a way of dealing with the fallout of the crisis.

"We are going to act firmly to generate jobs," Lupi said.

He reiterated that the use of resources from income taxes like the FGTS or FAT to help struggling industries should be linked to their safeguarding and creating jobs -- comments which drew some controversy last week.

"It is incoherent to (use) the money of workers to fire workers," Lupi said.

Despite the cuts in December, Brazil's economy generated 1.45 million formal jobs in 2008 but this was down from a record of 1.62 million in 2007, the ministry said.

Increasing the number of formal jobs has been one of the top priorities of the Lula administration because they raise social benefits for workers and increase government tax receipts.