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‐3% ANNEX: Summary of recent country experiences BRAZIL Labor market facts The global economic slowdown is having a sharp impact on Brazilian labor markets but recovery may occur soon. After years of sustained employment creation and falling unemployment, the unemployment rate in Metropolitan Areas experienced its largest increase ever from 6.8 in December 2008 to 9.0 in March 2009 (Figure 2). Most of the net job losses so far seem to be among non‐salaried workers, but there is an important decline in net job creation among salaried workers since mid 2008 (see Figure 3) which is consistent with previous findings that “…the countercyclical rise in unemployment and informality is driven primarily by a reduction in hiring in the formal sector, rather than increased labor shedding…” (see LCR Crisis Brief by Bill Maloney).110 Wages in the informal sector, which are less likely to be affected by minimum wage regulations, seem to be adjusting downwards during recent months, partly due to the high food inflation during 2008. • • • Unemployment rates had a large increase in January 2009, in a period of historically low levels. While January is a month with seasonal increases in unemployment, 2009 showed the largest jump (21 percent) in the number of unemployed, compared to the increases in January 2007 (10.7 percent) or January 2006 (10.6 percent).111 Still, this sudden increase in the number of unemployed in urban Brazil is taking place when the unemployment rate is at historical low levels: the average unemployment rate between October and December 2008 was 7.5 percent, the lowest since 2002. This recent increase in unemployment has been particularly acute in Sao Paulo where the unemployment rate reached 9.4 percent (compared to December’s 7.1%). By February the unemployment rate stayed around 8.4 percent and in March the number of unemployment insurance requests actually declined, suggesting a gradual improvement in labor market outcomes. The sharp impact on labor markets is primarily driven by the employment reduction in the informal labor market. Labor market informality in Brazil has been traditionally countercyclical, and was declining during the recent fast growth period. Since the onset of the crisis, the number of informal workers112 in Metropolitan Areas was reduced by 3.2 percent (90 thousand workers) between January 2008 and January 2009, compared to an increase in the number of formal workers113 by 4.5 percent (about 400 thousand workers) in the same period. After an early ‐‐ and substantial – net employment reduction in the formal sector, labor demand shows signs of stability by March 2009. According to the roster of formal workers in the private sector (Caged),114 close to 800 thousand formal jobs were lost between November 2008 and January 2009 ‐‐ with a peak of 654 thousand in Dece...
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