Letter IEDI n. 1007–Industrial employment and the coronavirus crisis
The coronavirus crisis interrupted a very positive trend in the evolution of employment in the manufacturing industry, which not only was systematically expanding since the beginning of 2019 but was also giving clear signs of greater vigor for 2020.
In this Letter, the IEDI analysis employment and income for the different branches of the private sector and the recent performance of the industry under the first effects of COVID-19. For that, we used the quarterly PNAD microdata, recently released by the IBGE, which allow a greater level of detail than the monthly survey data.
From the first to the fourth quarter of last year, the growth in the number of employed persons in the sector accelerated from +0.8% to +3.0%, increasing its contribution to the improvement of general employment in the private sector from 6% to 17.4 % in the same period. In Q1/20, however, there was a significant loss of dynamism and industrial employment increased much less: +1.1% compared to Q1/19.
Even though social isolation was adopted only from the end of March and although industrial employment is mostly formal (63.4%), which gives companies an initial margin to adapt to an abrupt drop in their revenues without resorting to layoffs—through the anticipation of holidays and access to emergency government programs—the severity of the COVID-19 crisis is also strongly felt in the sector.
Record falls in April, according to CAGED as well as the Continuous PNAD, indicate that the employment situation will worsen even more. In Q1/ 20, however, the industry managed to prevent private sector work as a whole from further decreasing, since the other sectors together registered a change of -0.1%.
Of the 24 manufacturing branches analyzed by this IEDI study, almost half (46%) indicated a reduction in employment already in Q1/20. Among the activities with the biggest losses are wood products, leather and footwear, chemical products and non-metallic minerals. Others did manage to stay in the black or to fall less, but did not fail to experience a significant slowdown, such as vehicles, beverages, textiles and pharma-chemicals and pharmaceuticals.
The performance of the manufacturing industry in formal employment was slightly better than other sectors': it grew + 1.3%, while the other private sector activities registered only +0.3% in Q1/20 versus the same period last year. There were 6.7 million people employed with a formal contract in the industry, representing 20% of total formal jobs created by the private sector in general.
Most of the contribution to this improvement in formal employment in the sector came from the low-tech industry, whose number of employed persons grew +2.8% compared to Q1/19, indicating greater dynamism than at the end of last year (+2%). The medium-high technology group also saw employment expand, but experienced a sharp slowdown: from +4.3% in Q4/19 to +2.3% in Q1/20. High technology (-4.2%) and medium-low (-1.8%) remained in the red.
Another development that the coronavirus crisis is likely to halt is the recent increase in the average real income in the industry and in the private sector in general, too. After four consecutive quarters in the red, the real income in manufacturing grew +1.2% in Q4/19 and +2% in Q1/20. In both quarters, industrial figures were higher than the numbers for the private sector as a whole (+0.5% and +1.5%, respectively).