Brazil Jobless Rate Hits Historic Low in Latest Win for Lula
(Bloomberg) -- Brazil’s jobless rate fell to the lowest level on record, representing a political win for a President Luiz Inacio Lula da Silva while adding to the concern of policymakers who fear the economy is running too hot.
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Official data released Friday showed the unemployment rate fell to 6.2% in October from a month earlier, matching the median estimate of analysts surveyed by Bloomberg. It is the lowest level in the data series going back to 2012, and showed some 6.8 million people were out of work.
Since returning to office in 2023, Lula has worked to make good on a campaign promise to create more jobs and prosperity for working Brazilians. The economy is surging under his watch, but investors are on tenterhooks over simmering inflation and a widening budget shortfall.
What Bloomberg Economics Says
“The Brazilian labor market remained hot in October which, combined with the government’s underwhelming fiscal announcement, will likely support bets on an outsized rate hike at the Dec. 11 policy meeting. Markets appear convinced that the Banco Central do Brasil will accelerate tightening, following a 50-basis-point move in November.”
— Adriana Dupita, Brazil and Argentina economist
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Double-digit borrowing costs, which the central bank began raising even in higher in September, have so far failed to significantly dent growth or bring price increases toward the 3% target.
Brazil’s economy, the largest in Latin America, is forecast to expand over 3% by year-end, driven by factors including public spending and a strong manufacturing sector.
The unemployment data “reinforces that the economy is heating up,” said Carla Argenta, chief economist at CM Capital Markets in Sao Paulo. “This data also pressures interest rate futures and the central bank for a series of borrowing cost hikes.”
Strong consumer demand, thanks in large part to a robust job market, and a slide in Brazilian assets are complicating the outlook. While the Lula government has tried to ease financial markets’ concerns, a much-awaited spending cut plan released this week fell well short of expectations.
That resulted in a slump in Brazilian stocks and its currency, which continued to weaken well past a historic threshold of 6 reais per dollar on Friday.
--With assistance from Giovanna Serafim, Robert Jameson and Beatriz Amat.
(Adds economist quotes starting in fourth paragraph)
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