Brazil’s jobless rate drops to 7.8% in quarter through August

SAO PAULO (Reuters) – Brazil’s jobless rate dropped for the fifth consecutive rolling quarter in the three months ended in August, reaching its lowest since early 2015 as the labor market in Latin America’s largest economy continues to show resilience.

The unemployment rate reached 7.8% in the quarter through August, statistics agency IBGE said on Friday, in line with market expectations and down from the 7.9% seen in the previous rolling quarter.

Brazil has been facing a “favorable scenario” on the employment side, IBGE’s research manager Adriana Beringuy said in a statement, which has allowed for a drop in the number of people actively looking for work in the country.

The job market’s strength is one of the reasons mentioned by some central bank board members for the authority not to pick up the pace of its 50-basis-point-per-meeting monetary easing, as it tends to support services inflation at higher levels.

“It has been a surprise, we’re heading towards the lowest unemployment levels in years,” central bank chief Roberto Campos Neto told a forum on Friday. “Wages are starting to tick upwards but still lag behind.”

There are now 8.4 million unemployed people in Brazil, according to IBGE, a 5.9% drop from the previous quarter. The number of employed people, meanwhile, rose 1.3% to 99.7 million.

The jobless rate is at its lowest since the quarter ended in February 2015, and the total number of unemployed people stands at its lowest since June 2015.

Some economists, nonetheless, do not see excessive pressure on consumer prices stemming from the labor market.

“The good news for the central bank is that the job market is not generating inflationary pressures, through wages, which will allow the COPOM to continue cutting interest rates over the coming months,” said Pantheon Macroeconomics’ Andres Abadia.

“We think that job market conditions will deteriorate at the margin, but this won’t be anything to worry about and will result from less dynamic economic activity than in the first half of the year.”

The central bank cut its benchmark interest rate by 50 basis points in each of the meetings this month and in August, bringing it down to 12.75% after holding it steady for nearly a year to tame high inflation.

(Reporting by Gabriel Araujo in Sao Paulo; Additional reporting by Bernardo Caram in Brasilia; Editing by Steven Grattan)