Five states have unemployment rates worthy of the rich countries club

The unemployment rate fell in 25 of the 27 federation units between the first and second quarters of this year, according to IBGE. Despite this positive movement, the reality of employment varies greatly across the country (see table at the end of this report).

On the one hand, there are states close to “full employment”, a situation in which, theoretically, everyone looking for work can find one relatively quickly. On the other hand, there are federation units with unemployment rates higher than 10% of the economically active population.

Five Brazilian states – Rondônia (2.4%), Mato Grosso (3%), Santa Catarina (3.5%), Mato Grosso do Sul (4.1%) and Paraná (4.9%) – had rates unemployment rate below 5% at the end of the first semester.

These are rates close to or lower than those of the Organization for Economic Cooperation and Development (OECD) countries – where unemployment is at the lowest levels in history. In July, average unemployment in this group, known informally as the “rich country club”, was 4.8%, just above the 4.7% floor reached in the previous month.

The rates in this select team of Brazilian states also come close to the concept of full employment. There is no consensus on what the unemployment rate would be for this, but it is estimated that it is somewhere between 3% and 6%, depending on the source consulted.

Agriculture is a “driver” in the champion states of the harvest

One of the factors that contributed to this scenario was the good moment in agriculture. Benefiting from good weather in the field, the grain harvest is expected to record a record 320.1 million tons, 17.4% more than in the previous cycle, according to the National Supply Company (Conab).

“Agriculture has been performing well for some time and this has stimulated employment in some of these states”, says economist Rodolpho Tobler, from the Brazilian Institute of Economics at Fundação Getulio Vargas (Ibre/FGV).

Strong growth in harvest was recorded in Mato Grosso (16.5%), Mato Grosso do Sul (23.3%) and Paraná (34.9%). In the previous harvest (2021/22), the last two states suffered from drought.

Mato Grosso was the state that created, proportionally, the largest number of formal jobs in the country this year. The expansion, until June, was 4.8%, double the national rate, according to the General Register of Employed and Unemployed Persons (Caged) of the Ministry of Labor. In parallel, the unemployment rate in the state fell from 4.4%, in the first half of 2022, to 3%, according to IBGE.

In addition to agriculture, the state has been recording good performance in other sectors. Industrial production, for example, increased 7.8% in 12 months, while in the country the indicator remained practically stable.

Sales in extended retail trade, which includes construction materials and vehicles, increased 6.7% in the 12 months to June. And the volume of services provided increased by 15.5%.

Dynamism favors Santa Catarina

In Santa Catarina, where the unemployment rate was 3.5% in June, the explanation for the performance of the job market is different. “The state has a more dynamic economy, which makes the job market more protected”, highlights Tobler.

Data from Caged show that in the first six months of the year, 61.5 thousand formal job opportunities were created, of which 50.7 thousand were in industry and services.

Despite the difference in economic profile, Santa Catarina and Mato Grosso have points in common in the job market, highlights economist Lucas Assis, from Tendências Consultoria.

“The low unemployment rates are associated with the high percentage of employed people in the working-age population, above the national average, benefiting from the positive performance of local economic activity in recent years”, he says.

In Santa Catarina, this rate – known as occupancy level – was 67.2% in June, while in Mato Grosso it was 65.5%. In the country, according to IBGE, the index was 61.6%.

Rondônia: low unemployment, but high informality

The lowest unemployment rate in the country is in Rondônia. At the end of the first semester, it was 2.4%, according to IBGE. But it does not necessarily reflect a more dynamic job market, point out analysts interviewed by People’s Gazette.

According to Assis, from Tendências, the low unemployment rate in Rondônia is associated with the reduced labor force participation rate, which is 56.7%. “This suggests a relatively smaller search for employment”, says the economist.

The number of people working on their own in this state is also large, points out the Tendências analyst. The percentage is 36.9%, while in the country it reaches 25.5%.

Another problem, according to Tobler, from Ibre/FGV, is the informality rate. It is 48.4% in Rondônia, one of the highest in the country.

Lack of competitiveness fuels unemployment in other states

Seven states – Pernambuco, Bahia, Amapá, Rio de Janeiro, Paraíba, Sergipe and Rio Grande do Norte – have unemployment rates above 10%. The list includes federation units that, according to the Public Leadership Center (CLP), are outside the list of the ten most competitive.

One of the obstacles in these states is structural in nature: they are not dynamic economies. In the case of the Northeast, there is another aggravating factor, says Tobler: the region suffers from climate problems such as lack of rain.

Rio de Janeiro is a special case. The state is the “lantern” of growth in this century among the federation units. The average growth between 2002 and 2020, the latest data available, was 0.71% per year, well below the Brazilian average speed (1.97% per year), which is no longer the highest.

The unemployment rate in Rio de Janeiro, which was 11.6% at the end of the first quarter, fell to 11.3% in the second. “Since before the Olympics, in 2016, Rio de Janeiro has not been doing well. It is going through a severe fiscal crisis and has had several governors arrested”, says the Ibre/FGV economist.

Unemployment rate in the states