Although Brazilian GDP surprised positively in 2023, thanks to the performance of agriculture, the domestic market gave indications of weakening, as discussed in Letter IEDI n. 1206 "Contrasts in economic performance in Q1'23." Household consumption and investment, as well as an important part of supply, such as manufacturing and construction, have either decreased or stagnated.

In this context, the labor market did not come out totally unscathed. The unemployment rate fell and the change in the number of employed people continued positive, but moving at a slower pace. As the IEDI Analyses have been highlighting, the evolution of employment in 2023 is likely to be less quantitative and more qualitative, due to a gradual process of formalization.

This Letter IEDI analyzes in detail the performance of private sector employment and income in Q1'23, with an emphasis on manufacturing. The study is based on the microdata of the Continuous PNAD, periodically released by the IBGE.

Compared to the beginning of last year, the total number of people employed in the private sector grew 2.4% in Q1'23, driven mainly by services (+4.5%) and retail trade (+3.1%). Although positive, this result was lower than that recorded in Q4'22: +3.4%, also in the year-on-year comparison.

In manufacturing, the increase in employment was very close to the average of the private sector, but still a little lower: +2.1%, which is equivalent to an additional 234 thousand people employed in the sector between Q1'22 and Q1'23. This pace of growth implied a slowdown compared to the performance at the end of 2022 (+3.2%).

Formal employment did better, with growth of 5.2% in the total private sector in Q1'23 versus the same period of the previous year, that is, more than double the pace of expansion of total private occupation. This difference in speed contributes to formalization in the labor market. 

In the manufacturing industry, the same occurred: formal jobs, registered +4.6% in Q1'23, advancing more than its total occupation. The sector accounted for 18% of the increase in formal posts in the private sector compared to Q1'22.

Although formal employment has advanced less in manufacturing than in the private sector as a whole, the sector continues to present higher rates of formalization. Its proportion of formal employment in total occupation reached 66.8% in Q1'23 (+1.6 p.p. against Q1'22) while the private sector average was of 42.6% (+1.1% p.p. compared to Q1'22).

As for the industrial branches, 16 branches of manufacturing were in the black in Q1'23, that is, 67% of the total, compared to 17 in the last quarter of 2022 (71% of the total), maintaining a certain diffusion of the growth of formal employment. The highest increases were in other transport equipment (+28.4%), electrical machinery, appliances and materials (+22.3%) and metallurgy (+20.6%).

In terms of technology intensity, there was growth in formal employment in the medium-high, medium and medium-low technology groups. In the high-tech category, occupation was practically stable in the year-on-year comparison.

With more intense growth in formal employment, which tends to have higher wages, and with the slowdown in inflation, the average real income of employed people has shown a positive evolution. Still, Q1'23 brought some loss of pace.

The average income in the total private sector went from an increase of 9.5% in Q4'22 in relation to the same period of the previous year to +7.5% in Q1'23 in the same comparison. In manufacturing, there was the same behavior, with 5.5% growth at the end of 2022 and +3.2% at the beginning of 2023.

The total usual real income evolved in the same direction both in total private sector as a whole (+10.8% in Q1'23) and in the manufacturing industry (+5.4%), due to the lower growth rates of occupation and average real income.

The full text is available in Portuguese.