Letter IEDI n. 1077—Industrial employment in 2020: lessening the crisis
The data recently released by the IBGE reveal that the country's unemployment level continues to break records in 2021. The rate of 14.4% in the quarter ended in Feb/21 was the highest for the period since the beginning of the continuous PNAD survey in 2012. Altogether, there are 14.4 million unemployed people.
In this Letter, the IEDI worked on microdata from IBGE's continuous PNAD for 2020, with emphasis on the evolution of industrial work. Under the effects of the pandemic, the labor market recorded an intense reduction in occupation and income and there were fewer people in the workforce compared to 2019. The industrial sector, even if only partially, helped to mitigate this situation.
Despite emergency aid measures and employment and income protection programs (BEM), according to the continuous PNAD the number of employed persons in the private sector decreased from 81.9 million in 2019 to 74.0 million people in 2020. In annual average terms, this is equivalent to a 9.5% decrease. Among the main economic sectors, the manufacturing industry was the one that registered the smallest job loss.
In the annual comparison, the decline in the number of employed persons in manufacturing reached -7.8%, that is, below the total figure for the private sector and well below the falls of activities that, unlike the industry, have low formal employment and, therefore, are more vulnerable to the economic cycle. These are the cases of services (-10.8%) and civil construction (-12.5%), both with double-digit contractions.
Although less acute, the loss of industrial jobs was widespread across its branches: 19 of the 24 branches were in the red (80% of the total), with emphasis on clothing and apparel, textiles, metal products, etc. Among the few on positive ground we saw computer equipment and electronic products, pharmaceutical and pharma-chemical products, and machinery and equipment.
In Q4/20, still reflecting with some lag the positive effects of the emergency aid and the easing of restrictive measures to combat the pandemic, employment increased again, registering +4.8% in relation to the immediately previous quarter. Manufacturing jobs grew 4.1% in the period.
However, this recent improvement only lessened the adverse employment situation compared to a year earlier. Private sector total jobs decreased by 8.8 million in absolute terms, a fall of 10.7%, after registering -14.0% in Q3/20.
In the manufacturing industry, the reduction was of 957 thousand posts, with a variation of -8.9% against Q4/19. In services (-13.5%), civil construction (-11.8%) and retail trade (-10.9%), losses were even more acute in this comparison.
The effects of the pandemic on the labor market were uneven among the different types of occupation. Taking annual averages for 2019 and 2020, the most vulnerable jobs in the private sector—that is, those without a formal contract—fell 16.5%. However, despite this, the crisis also affected formal jobs, even if less intensely (-7.8%).
With regard to formal employment, the manufacturing industry also posted a smaller loss than other sectors. It registered -6.1% in 2020, while the sectors of construction (-13.5%), services (-12.6%) and retail (-11.2%) presented falls close to twice the industry's losses.
As is known, industrial employment is mostly formal and, from 2019 to 2020, this proportion increased from 62.7% to 63.8%, given the more severe effects of the pandemic on informal work. This level maintained the favorable differential for the industry in comparison with other sectors, which also registered an increase in the weight of formal occupations but continued with a formalization rate much lower than the industry's, such as trade with 47.0% and services with 40.6%.
In addition to employment, the COVID-19 pandemic has also damaged total real income, which is the basis of household consumption. In all three quarters of 2020 affected by the pandemic, the volume of income regularly earned was on negative ground. Unlike what happened to employment, there was no easing of the fall in total private sector income in the last quarter of the year: -9.2% compared to Q4/19.
The real situation, however, tends to be even more adverse. This is because, with the reduction in the amount of emergency aid paid in the last quarter of the year and the decrease in wages and hours, the income effectively received by workers fell 2.7% in Q4/20. This is a very different picture from regular earnings, which registered +2.0%, giving rise to an even greater contraction of the total volume of income.
Once again, also with regard to total income, the loss in the manufacturing industry was much smaller than that of the private sector as a whole: -4.7%, that is, almost half the decline in the general average when regular earnings are considered.