Bloomberg News

Spreading Brazil Strike Delays Release of June Jobless Rate

July 26, 2012

A spreading strike by Brazilian civil servants delayed the release of the nation’s June unemployment rate today, leaving economists unable to gauge the strength of the labor market that the government is counting on to fuel faster growth in the remainder of the year.

The Rio de Janeiro-based national statistics agency said that because of a month-long strike by some of its employees it was able to analyze data for only five of six metropolitan areas normally studied in its monthly survey. The national rate will be released at an undefined date once data collected in Rio de Janeiro is analyzed, the agency said.

Over 100,000 workers at public universities, state-run power company Centrais Eletricas Brasileiras SA and several regulatory agencies have walked off the job in the past month demanding wage increases to keep pace with inflation that has stayed above the government’s 4.5 percent target since 2010.

The first coordinated strike against President Dilma Rousseff’s government has intensified in recent days, delaying the unloading of ships at Brazil’s ports and forcing the federal government to issue a decree yesterday allowing it to work with local authorities to guarantee essential services.

The statistics agency said today that no other economic report has been affected by the strike, and confirmed that the existing calendar for future releases will be maintained. On Aug. 1, the agency known as IBGE for its Portuguese initials is scheduled to release industrial production data for June.

Insufficient Data

Economists said that today’s report was insufficient to allow them to make an analysis of national labor market trends. Unemployment in the Sao Paulo metropolitan region, the country’s largest, rose to 6.5 percent in June from 6.2 percent, according to the report. The jobless rate also rose in Recife, to 6.3 percent, and fell in Belo Horizonte, Porto Alegre and Salvador.

“It’s not a precise number,” said Alexandre Barbosa, chief economist at Banco Cooperativo Sicredi, said in an interview from Sao Paulo. “It could be that Rio de Janeiro had very different movement than the other regions.”

Analysts had been forecasting that the national unemployment rate would fall to 5.7 percent from 5.8 percent in May, according to the median estimate of 21 economists surveyed by Bloomberg.

Slower Job Growth

Rousseff’s government has reduced interest rates, enacted tax cuts and increased subsidized credit to businesses in a bid to spur economic growth that was half the pace of the U.S. in the first quarter. With industrial production falling and indebted consumers cutting back, Latin America’s largest economy is generating fewer jobs than last year even as joblessness remains at historically low levels.

“The number of new entrants in the job market has diminished, and this has allowed Brazil, even though it’s creating less jobs, to keep the unemployment rate stable,” Luciano Rostagno, chief strategist at Banco West LB do Brasil SA, said by phone from Sao Paulo before today’s report.

Brazil created 858,334 formal jobs in the first half of 2012, down 32 percent from a year ago, according to figures from the Labor Ministry. That was the lowest number for that period since 2009.

Slow Expansion

Brazil’s economy expanded at an annualized rate of 0.8 percent in the first quarter. The central bank forecasts 2.5 percent growth this year, down from 2.7 percent last year and 7.5 percent in 2010.

Swap rates on the contract maturing due January 2013, the most traded in Sao Paulo, rose 3 basis points to 7.70 percent at 9:39 a.m. Brasilia time. The real rose 0.5 percent to 2.0222 per U.S. dollar.

The auto industry, a mainstay of Brazil’s economy, has recently sent mixed signals on employment.

While the local units of Volvo and Daimler AG’s Mercedes- Benz have ordered layoffs and furloughs, and General Motors Co. (GM:US) this week suspended production at its units near Sao Paulo amid a dispute with unions, Fiat SpA (F) said July 23 that it plans to hire 600 employees in Brazil to boost production as government tax cuts and lower interest rates sustain demand.

Car sales reached 1.72 million in the first half of the year, down 1.2 percent from last year, according to Brazil’s car dealership association, known as Fenabrave.

Brazil’s central bank has reduced the Selic target lending rate by 450 basis points since August to a record low 8 percent.

Bank President Alexandre Tombini said this week that Brazil’s labor market has so far been little affected by the slowdown as companies hoard labor in anticipation of a pick-up in growth in the second half of the year as the rate cuts and other stimulus measures work their way through the economy.

To contact the reporter on this story: David Biller in Boston at dbiller1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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