Brazil's jobless rate falls to record 5.3% in August

Brazil's unemployment rate fell from 5.6% to 5.3% in the three months ended in August, according to the Pnad survey published by the statistics agency IBGE on Tuesday, September 29. This is the lowest rate in the historical series that began in 2012. The total employed population reached 103.5 million people, which corresponds to an employment-to-population ratio of 58.9%.

The labor market remained firm even as gross domestic product growth slowed from 1.1% in the first quarter to 0.5% in the second quarter. XP reported that formal jobs grew 1.8% year on year, while informal employment fell 0.1%. Hiring in the quarter concentrated in manufacturing and civil construction, while formal private contracts were statistically flat. XP projects the jobless rate will reach 5.6% at the end of 2026 and 6.5% at the end of 2027.

Average real habitual earnings rose 3.7% over 12 months to BRL 3,777, taking total real wage mass up 4.8% annually to BRL 385.6 billion. At the same time, household debt reached 49.9% of income in July, and debt service jumped 1.4 percentage points in one year to 28.7%, according to Arnaldo Lima, head of IR and economist at Polo Capital. Lima noted that personal default rates climbed to 6.0% in August, while the default rate on non-earmarked credit reached 8.0%, alongside an average borrowing rate of 61.7% per year.

The labor print presents headwinds for the central bank as it steers the benchmark Selic rate, which sits at 13.75%. Services inflation stands at 5.47% over 12 months. Sidney Lima, an analyst at Ouro Preto Investimentos, noted that elevated employment and wage gains keep services inflation resilient, limiting scope for the central bank to accelerate interest-rate cuts.