Job market follows the economy and is expected to slow down in 2024

Unemployment is falling: it fell from 8.3% in October 2022 to 7.6% a year later. And labor income had a real gain (above inflation) of 3.8% in the period, according to the Brazilian Institute of Geography and Statistics (IBGE). But the positive scenario for the job market could change in 2024, with the slowdown in economic activity.

After three years of GDP growing at rates close to 3%, projections from banks, consultancies and brokers point to an expansion close to 1.5% in 2024.

The situation has already started to change in the job market

The favorable scenario for the job market has already started to “turn around”. According to the Economic Research Institute Foundation (Fipe), although October marked the 11th consecutive month with adjustments above the INPC, the profit margin has been decreasing. XP Investimentos does not expect there to be significant increases in real wages to the point of putting pressure on the conduct of monetary policy in the short term.

Another indicator that has shown a loss in dynamism is the net creation of formal jobs. The country generated 1.8 million jobs between January and October, according to data from the New General Register of Employed and Unemployed People (Novo Caged), but this result is the weakest since the Covid-19 pandemic. In the same period of 2021, 2.8 million new jobs were created and in 2022, 2.3 million.

The labor force participation rate has also been showing a worsening in relation to the same month last year. The indicator, which measures the percentage of people of working age (14 years or older) who are employed or looking for work, fell from 62.6% to 61.9% between October 2022 and 2023.

“It could be an effect of the ‘turbination’ of Bolsa Família, which took away the attractiveness of the job market”, says Gabriel Fongaro, senior economist at Julius Baer Brasil bank.

With the end of the effects of the “turbination”, economists interviewed by People’s Gazette believe that many beneficiaries will start looking for alternatives to enter the job market, forcing the unemployment rate upwards. “Some will take some time to find a job”, highlights the MUFG Brasil bank analysis team.

Greater effects from the second trimester onwards

The expectation is that the slowdown will be more noticeable from the second quarter onwards. “The job market is expected to move sideways throughout 2024”, says researcher Rodolpho Tobler, from the Brazilian Institute of Economics at Fundação Getulio Vargas (Ibre/FGV).

He points out that the duration of this cycle of less dynamism in the job market will be linked to the pace of the fall in the Selic rate, which is currently at 11.75% per year. “High interest rates hold back employment,” he says.

The midpoint of the BC’s Focus bulletin projections for interest rates at the end of 2024 is 9.25% per year, which indicates another five cuts of half a percentage point.

The National Confederation of Industry (CNI) also does not expect the job market to record the same performance as in 2023. The expectation is for lower growth in both the number of employed people and the mass of income.

This situation could cause family consumption to grow less in the new year. The business entity’s projection is for an expansion of 1.8%.

According to Alessandra Ribeiro, partner at Tendências Consultoria, job growth will be more concentrated in the second half of the year. “In the first semester it will be more depressed and the only reason it won’t be so bad is because the worst moment for families’ financial situation has passed,” she says.

The CIO of UBS bank, Luciano Telo, is more optimistic about the job market, which according to him should continue to show resilience. For the executive, the positive behavior is the effect of the 2017 labor reform, which made hiring rules more flexible.

Works and election year can boost construction

One sector in which good opportunities for creating job opportunities are expected is construction. The Brazilian Chamber of the Construction Industry (CBIC) projects a 1.3% growth in the sector’s GDP.

According to Juliana Ribeiro, manager of the Page Group, a series of factors drive the hiring of personnel in this sector: the drop in interest rates should favor the real estate segment and there are municipal elections in 2024, which favors the carrying out of infrastructure works.

Another stimulus for infrastructure works, according to CBIC, could come from the New Growth Acceleration Program (PAC).

Despite expectations of a more moderate performance in agriculture in 2024, she points out that the sector has been going through a phase of professionalization, which has demanded professionals from different areas such as human resources, finance and supplies.

The specialist sees a transformation in another area that has been extremely heated in recent years: technology. Traditional companies are taking advantage of professionals who were laid off during the downsizing carried out by large corporations in the sector. “There are many companies still making the ‘turn of the switch’, from an analogue to a digital model”, she says.

Lack of qualified professionals will persist

A difficulty that is likely to persist in 2024, according to the vice president of strategic partnerships at recruiter Robert Half, Alexandre Attauah, is in relation to hiring qualified professionals.

Eight out of ten companies report this problem. Two-thirds of companies do not see the possibility of this scenario changing in the next six months. The recruiter estimates that the unemployment rate among qualified professionals is around 3%.

Even with this low rate, the possibilities for moving this professional profile are great, says the executive. Two factors can influence this decision: the search for new challenges and dissatisfaction with the work model, as changes in recent years have brought to the surface issues related to mental health and the balance between professional and personal life.

Attuah recalls that this last issue has gained importance in recent months, as many companies demobilize home office. The main criticisms coming from corporations are that the model, widespread after the pandemic, makes it difficult to exchange knowledge between professionals. There are also losses of organizational culture.

On the other hand, the 100% in-person model draws criticism from many professionals, he says. One of the reasons, in large urban centers, is the loss of time traveling between home and the office.

The tendency, according to Attauah, is to find a common place. “In the coming years, hybrid and flexible work models will tend to prevail for roles where this is possible.”