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Brazil / Low unemployment rate matches record but …

Brazil’s unemployment rate matched a record low in November, but the seemingly positive figure hides an alarming change in Latin America’s largest economy: fewer Brazilians are working and even less are looking for work.

The shift reflects ongoing uncertainties amid a dramatic slowdown in Brazil’s economy over the past three years. After emerging as an economic powerhouse on the same level as China and India with 7.5% growth in 2010, Brazil now finds itself teetering on the brink of recession after the economy shrank 0.5% in the third quarter.

The once-promising future has been dragged down by ongoing fallout from the global financial crisis, an overvalued currency that crimped exports and a burdensome bureaucracy that drives up the cost of doing business. Heavy government intervention in the economy has also caused investments to plummet, removing an important motor of growth.

Brazil’s gross domestic product is expected to post a meager expansion of 2.3% in 2013, according to the Brazilian Central Bank‘s latest survey of economists. That’s well below the 4.5% growth Brazil’s government estimated at the start of the year. For next year, growth is pegged at 2.0%.

With such a gloomy outlook, businesses are more reluctant to hire. So how come Brazil’s unemployment rate plummeted to 4.6% in November from 5.2% in October?

As in most other countries, the unemployment rate is determined by the relationship between the number of people employed in the workforce and the number of people actively seeking a job, noted Ricardo Barboza of the Federal University of Rio de Janeiro‘s Economics Institute. “A slowdown in Brazil’s GDP will typically generate an upswing in unemployment,” Mr. Barboza said.

But this time, the two factors have diverged. The number of people employed in Brazil has declined, but the number of people looking for work has declined at a much faster pace, Mr. Baroboza said. That pushes down the unemployment rate.

Chosen excerpts by Job Market Monitor. Read the whole story at 

WSJ

via Brazilian Unemployment Matches Record Low, but More Dropping Out of Work Force – Real Time Economics – WSJ.

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