Brazil may create up to 1.5 million formal jobs in 2023 – 06/22/2023 – Market

The generation of formal jobs in the labor market should remain positive until the end of the year, with the possibility of creating 1.5 million jobs in 2023. The average income of workers, however, may still require more time to increase.

According to José Pastore, retired professor at the Faculty of Economics at USP and Fernando de Holanda Barbosa Filho, researcher at Ibre-FGV (Brazilian Institute of Economics at the Getulio Vargas Foundation), in an online seminar promoted by Sheet and FGV, the job recovery reflects the return to normal of the activities compromised during the pandemic.

According to the IBGE, the generation of formal jobs has been accelerating. In the 12 months ending in April, the country created 1.9 million formal jobs, 705 thousand of them in the first four months of this year alone.

Barbosa Filho points out that, in 2017 and 2018, when the country was recovering from the strong recession of the 2015-2016 biennium, most of the vacancies created were informal. Now, after the pandemic, there is more strength in formalization. Currently, 61.1% of jobs available in Brazil have a formal contract.

Pastore says, however, that about two-thirds of the jobs created continue to be of low quality, with the majority of those hired having only completed high school or less. “This is something that cannot be resolved in the short term”, he says.

Barbosa Filho also considers that the current unemployment rate —8.5% up to April and the lowest since April 2015— may reflect a lower participation of unemployed people in the search for a vacancy.

According to him, this may be related to the increase in the amount now paid by Bolsa Família, of R$ 705, on average. “This is equivalent to around 70% of a minimum wage, which may be withdrawing people from the market, bringing negative future implications for productivity.”

Barbosa Filho says that possibly the average income from work has not grown so strongly (it was at R$ 2,891 per month in April, still below the pre-pandemic) due to the smaller number of people looking for a job. “The market is not so tight as to put pressure on wages,” he says.

According to economists, two opposing forces are at work in the labor market at the moment. If, on the one hand, the basic interest rate (13.75% per year) remains high, containing growth, the slowdown in inflation will improve household disposable income and activity.

But, in the assessment of both, the Lula government should work to reduce uncertainties in the macroeconomic field (abandoning attempts to backtrack on reforms and criticize the Central Bank) to create a more favorable and reliable environment for businessmen to invest and create more jobs.

Watch the full seminar provided by Sheet and the FGV: