Letter IEDI n. 1053–No industrial employment reaction
After the COVID-19 shock in the second quarter of 2020, the recovery of the labor market has been difficult and slow. A survey carried out by the IEDI shows that the private sector lost 9.6 million jobs between the 1st and 2nd quarters, according to the IBGE Continuous PNAD. Despite a significant easing, the trend continued in Q3/20 and 352 thousand more job posts were extinguished in relation to the previous quarter.
Compared to a year ago, the situation remains dramatic. The number of employed persons in the private sector decreased 13.1% in Q2/20 and 14.0% in Q3/20. About 11.5 million jobs were lost from Q3/19 to Q3/20.
The industry was not spared from this adverse development. Despite this, it contributed less than other activities to the drop in employment in the period. Its losses, of 1.3 million jobs between Q3/19 and Q3/20, represent little more than 10% of the total fall. Trade and services together accounted for around 75%.
In the year-over-year comparison, the -11.9% figure for manufacturing employment was in line with that of Q2/20 (-11.1%) and, again, lower than the decline in the private sector as a whole. The additional deterioration was mainly due to services, which registered -13.9% in Q2/20 and -16.7% in Q3/20.
In Jul–Sep/20, manufacturing industry employment decreased in 22 of the 24 branches analyzed, although there was an increase in some segments, such as computer equipment, electronic and optical products (+25.6%) and pharmo-chemical and pharmaceutical products (+15.1%), in the interannual comparison.
In the first case, the characteristics of the coronavirus outbreak in the state of Amazonas may have contributed to this positive evolution, as it was much more intense in the beginning, but started to recede before other regions of the country, allowing the early resumption of industrial activities in the Manaus Free Economic Zone. In the second case, as is well known, because this is a sanitary crisis the sector has been spared from profound losses.
As for formal employment, as seen since the beginning of the pandemic, the decline was less intense than in other forms of work. However, it still faces strong adversities. Employment with a formal contract decreased 11.2% in the total private sector and 9.4% in the manufacturing industry. Private jobs without a formal contract, in turn, fell 23.9% compared to Q3/19.
It is also worth noting that in all sectors surveyed by the IEDI there was an additional worsening of formal work from the 2nd to the 3rd quarter of the year. In the industry, 54% of its branches accelerated redundancies in the period. This suggests that the worst of the formal employment crisis may be still to come, especially as emergency aid programs were to be extinguished at the turn of the year and GDP entered a low growth phase.
Total real income of employed persons in the private sector decreased 7.6% compared to Q3/19, a similar pace to that of the second quarter (-7.1%). The reaction of this indicator is important for household consumption to recover. There was a further shrinking of total income in construction, trade and the services sector. In the manufacturing industry, the scenario approached stability, reaching -0.8% after registering -3.6% in Q2/ 20, always in relation to the same period of the previous year.
In addition to employment falling less than in the rest of the private sector, the average income in manufacturing also outperformed the others'. It is worth noting that the results observed since the beginning of the pandemic indicate that the lowest-paid jobs were the most affected by the reduction in occupation, raising the average income of those who managed to preserve their jobs.
Although economic activity indicators have shown, in a way, a rapid reaction, with some sectors—such as the industry and retail trade—returning to pre-pandemic levels, employment has not followed the same trajectory.
Traditionally, the labor market responds with a lag to other economic indexes, as employers await a consistent recovery of the economy in order to hire new workers. In this sense, policies for maintaining income and employment, which for now have managed to mitigate part of the negative effects of COVID-19, may continue to be necessary until the growth of the economy is robust and consistent enough to give rise to a revival of employment.