Brazil’s jobless rate fell in the quarter through June to its lowest level for the period in nine years, statistics agency IBGE said on Friday, underscoring the labor market’s resilience despite its high interest rates.
Unemployment in Latin America’s largest economy hit 8.0% in the three months through June, down from 8.3% in the previous rolling quarter and below market expectations, as economists polled by Reuters had a median forecast of 8.2%.
It was the fourth consecutive drop for a rolling quarter, according to IBGE, which said the move reflected seasonally lower vacancy rates. There are now 8.6 million unemployed people in Brazil, it added.
Finance Minister Fernando Haddad cautioned that despite the positive data, the unemployment rate should not be perceived as an indicator of a strong economy, given the country’s 10% real interest rate leading to an activity slowdown.
Brazil’s benchmark interest rate stands at a six-year high of 13.75% since August 2022 as part of the central bank’s bid to lower inflation, although an easing cycle is widely expected to start early next month.
Talking to journalist, Haddad said he sees plenty of room for the central bank to kick off its monetary easing cycle with a “reasonable” rate cut.
Some economists also expect high interest rates to take their toll going ahead, as economic growth softens in the country.
“All in all, the labor market remained strong in the second quarter, defying the drag from stiflingly high interest rates,” Pantheon Macroeconomics’ chief economist for Latin America, Andres Abadia, said.
“But we still expect conditions to deteriorate at the margin in Q3 and early Q4, due to the lagged effect of increased borrowing costs in key sectors.”
Even so, the latest data were still welcomed by President Luiz Inacio Lula da Silva’s government, as the leftist leader campaigned last year pledging to reduce unemployment in the country.
“The result shows that nothing resists hard work and that Brazil is on the right track,” Lula’s chief of staff Rui Costa wrote on messaging platform X, formerly known as Twitter.