economic slowdown reduces job creation

The pace of opening job opportunities with a formal contract is losing strength. Last year, according to the General Register of Employed and Unemployed (Novo Caged), 2.01 million formal jobs were created, 29.5% less than in the previous year. The brake should be stronger in 2023: there is already a bank that predicts the generation of only 500 thousand job openings throughout the year.

The main factor responsible for this scenario is the slowdown in economic activity, which began in the second half of last year. Between July – the best moment of 2022 – and December, the level of economic activity in the country fell by 2.5%, according to the IBC-Br index, calculated by the Central Bank.

Market expectations for the Gross Domestic Product (GDP) also reflect this brake. If for 2022 the median projection indicates an increase of 3% (the official data, from the IBGE, will be released next Thursday), for 2023 the market consensus points to economic growth of only 0.84%.

This loss of strength is motivated by less fiscal space for expanding government spending, by the high level of interest rates and by the more adverse situation in global terms – reflecting the worsening of financial conditions and the expectation of a reduction in commodity prices.

Deceleration gained strength in the last quarter

Bradesco points out that the pace of formal hiring lost more strength in the last quarter of 2022. The trend is for this scenario to repeat itself this year.

The expectation is that the pace of net job creation will be below that observed between 2021 and 2022, but still in positive territory. The bank projects the net generation of 500,000 jobs with a formal contract.

Accommodation in the job market is also provided by Tendências Consultoria. Analyst Lucas Assis says that the less expressive growth of the Brazilian economy should reduce the momentum of hiring.

The growth of the employed population lost dynamism in recent months, mainly among the informal ones. The number of self-employed workers fell from 25.9 million in the rolling quarter ending in August to 25.5 million in November. A similar situation occurred among family auxiliary workers. The number of employed persons fell, in this period, from 1.8 million to 1.6 million.

“In the midst of the exhaustion of the impulse generated by the normalization of face-to-face services, the occupancy level remained at 57.4% in the quarter ended in November, lower than the level prevailing before the crisis of the 2015-16 biennium (58.4% in the average between 2012-2014 for the same quarter), suggesting a certain idleness in the job market”, says Assis.

Scenarios for the unemployment rate

The unemployment rate has been falling since February 2022, when it was at 11.2%, according to the IBGE’s Pnad Contínua survey. The last data available, from November, shows that it fell to 8.1%, the lowest level since April 2015.

But the reasons for the fall have changed. “Unlike what happened during the recovery process, which started in mid-2021, its recent decline has not been caused by the expansion of occupation, but by a retraction of the workforce”, highlights Assis, from Tendências.

The unemployment rate is measured based on the workforce, that is, the total number of people who are working or looking for a job. If a large number of people give up looking for a job, it ends up reducing the workforce – and thus the unemployment rate can fall even if there is no increase in hiring.

A number of factors weigh on the downturn in the workforce, points out the analyst. Among them, the departure of older people from the labor market and the disincentive to look for a job caused by government income transfers.

He assesses that in the short term, even in the face of the loss of dynamism in employment, the unemployment rate should still have a slight drop, benefited by the modest performance of the workforce. But, given the projections of a slowdown in economic activity until the end of the year, the signs are of an increase in unemployment.

“The generation of vacancies in the private sector is slowing down”, points out Itaú’s economic analysis team.

According to Focus, the median of projections for the unemployment rate at the end of 2023 is 8.7%, above the midpoint of forecasts for December 2022 (8%) and the last data calculated by the IBGE, the aforementioned index from 8.1% in November.

Where will vacancies be in 2023?

Fewer formal job opportunities should open in 2023, after two straight years with the net creation of more than 2 million formal jobs each year.

Although the balance should be more discreet this year, it will still be positive and hiring should be spread across the main economic activities. The highlight should be, once again, the services sector. Tendências evaluates that the expectation is to maintain growth in the volume provided to families, one of the most relevant segments. Between January and November 2022, the expansion was 8.5%, compared to the previous year, points out the IBGE.

“The expectation is to maintain the growth of services to families, capturing both the increase in income in the labor market (although limited by the first negative signs of occupation) and, from the point of view of classes, by families with higher incomes, either by the positive performance of their income, or the possibility of using their savings”, says Assis, from Tendências.

The evolution of work in the industrial sector – which created 252 thousand opportunities last year, according to Novo Caged – should remain limited. According to the analyst, the explanation lies in the slow pace of production of durable and capital goods, due to the restrictive scenario influenced by high interest rates and uncertainties regarding economic policy.

Another factor that reinforces the loss of dynamism of the industrial sector is the expectation of a lower growth of the world economy. The International Monetary Fund (IMF) projects that world GDP will increase by 2.9% in 2023, after an estimated increase of 3.4% in 2022.

The relatively positive scenario for household income in 2023 should benefit the segment of less credit-sensitive goods, such as food and non-durable goods.

A sector that should see a cooling off in the formal labor market is civil construction. This, according to Assis, has already happened in the self-construction market and is expected for the medium and high end segments.

Trends for the job market in the coming years

Assis assesses that, in the coming years, the formalization of the labor market can benefit from the late effects of the 2017 labor reform. He exemplifies showing that some results were already collected last year, with the net opening of 84.2 thousand jobs in the intermittent modality and another 30.8 thousand in partial regime.

The consulting scenario for the new government contemplates the non-reversal of the good agendas forwarded since 2016 in the microeconomic scope.

“The assessment is that, although there are risks of setbacks – such as in terms of intermittent work and outsourcing – there are also elements of containment, given by movements in the financial market, institutionalities created since then and the very heterogeneity of the government’s support base. “, it says.