Brazil: Unemployment at new high, touches 12% in last quarter of 2016

Rio de Janeiro - State of Rio de Janeiro, BrazilUpdated: Jan 31, 2017, 06:41 PM IST

A panel of the government's economic advisers on Wednesday drastically cut their forecast for growth in 2022 to 1.8 percent, down from their previous estimate of 4.6 percent (representative image). Photograph:(Reuters)

Brazil's unemployment rate hit 12 per cent between October and December, another record high, official data showed even as the economy is forecast to slowly exit deep recession.

That amounted to 12.3 million people looking for work at the end of 2016, a third more than in the last quarter a year earlier, the Brazilian Institute for Geography and Statistics said.

Market analysts with Gradual Investimentos consultants had predicted the unemployment rate would hold at the previous quarter's 11.9 per cent, which was also a record high.

Joblessness has dented the popularity of the market-friendly government of President Michel Temer, who took over last year after the impeachment of president Dilma Rousseff with promises to restore the Latin American giant's economy to health.

In the final quarter of 2015 -- still under Rousseff's administration -- unemployment was nine per cent, while a year earlier it had been 6.5 per cent.

Brazil's economy shrank 3.8 per cent in 2015 and is expected to have contracted a further 3.5 per cent in 2016, the worst recession in a century.

The central bank predicts a return to economic growth of 0.8 per cent next year, although the International Monetary Fund foresees growth of just 0.2 per cent.

In another sign of the country's financial troubles, the central bank said yesterday that the budget deficit hit a record high in 2016. The primary budget deficit -- excluding interest payments -- reached 155.8 billion Brazilian Reals.

The good news was that it remained within the government's target.

As it tries to stimulate the economy while helping the stubbornly high inflation to keep dropping, the bank is expected to make further cuts to its key interest rate.

Last month the bank cut the rate by a bigger than expected 0.75 per cent to 13 per cent, down from 14.25 per cent in October but still one of the world's highest.

Market expectations are for cuts to about 10.9 per cent this year. Inflation, meanwhile, has dipped from 10.67 per cent in 2015 to 6.29 per cent in 2016 and is expected to close 2017 at 4.7 per cent.

However, the interest rate cuts have yet to help the jobs market, said Alex Agostini, chief economist at Austin Rating.

Employment is "the last variable that will see improvement" because for now businesses are fighting for greater productivity rather than hiring.

"Those who have work will have to work more," he said.