Letter IEDI n. 1244—Employment and income in the private sector
In Q3'23, the Brazilian economy lost momentum, being virtually stagnant (+0.1%, with seasonal adjustment). Despite this, it hit the brakes less strongly than many analysts expected, which was, to a large extent, due to the resilience of household consumption, as we saw in the IEDI Analysis of December 05, 2023.
Alongside the deceleration in inflation and government income transfer programs, the continuous improvement in employment was important to avoid a consumption slowdown. Still, the generation of new job posts did not go unharmed and what we have witnessed is a qualitative advance, with formal occupations growing more than total employment.
Today's Letter IEDI, based on Pnad/IBGE microdata, analyzes the evolution of private employment in Q3'23, highlighting industrial employment and its different branches and technology-intensity groups.
The loss of momentum in the economy in Q3'23 was accompanied by a slowdown in job creation in the labor market, but some economic sectors maintained the expansion of posts, such as services, the extractive industry and electricity and gas activities. It is worth noting that, in the GDP data, these activities present more favorable results.
For the total private sector, the number of people employed increased 0.6% in Q3'23, in the year-on-year comparison, equivalent to 508 thousand more people working. Although this result is slightly higher than the 0.3% growth rate observed in Q2'23, it is well below the +2.4% of Q1'23.
Manufacturing, in turn, had in Q3'23 its first negative result since early 2021, but presented the lowest reduction in occupation: -1.5% in relation to the same period of the previous year. In addition to the industry, employment also fell in agriculture (-3.8%), civil construction (-2.3%) and retail trade (-1.5%).
In the opposite direction, the service sector stood out, registering an increase sufficient to compensate for the losses of the other sectors: 3.4% versus Q3'22, equivalent to 1.3 million more people employed. This result was due to the fact that services include the most labor-intensive activities in the economy.
As the IEDI has emphasized in its monthly analyses, what characterized the labor market in 2023 was not so much the intensity of the rise in workforce occupation, but rather its qualitative progress, with a better performance of formal employment.
Formal employment in the private sector increased significantly in Q3'23, by +3.0%, that is, a pace five times higher than that of total occupation in the period. And this pace could have been higher if the industry were growing and hiring, given that it is one of the sectors that privileges formal labor relations the most (66.7% of its workforce compared to 42.6% in the private sector on average).
In manufacturing, there was a decline in formal employment in the year-on-year comparison (-0.5%), as happened in agriculture (-1.7%) and civil construction (-2.1%). In the case of the industry, it is important to highlight the greater resilience of formal employment, since its pace of decline was 1/3 of the pace of decrease in total employment of the sector. Among those that expanded, services (+5.2%) and trade (+2.9%) stand out.
The number of people employed increased in about half the industrial branches: 11 were in the black compared to Q3'22, practically the same proportion as in previous quarters, and in another 12 branches there was a decline in occupation. The positive highlights were: coke; petroleum products and biofuels (+16.4%) and beverages (+15.9%).
Considering industrial branches by technology intensity, only in the medium technology segments there was an increase in employment: +5.3%, also in relation to Q3'22. The high-tech (-9.2%) and medium-high (-4.9%) groups registered negative rates, while medium-low technology showed stability.
Due to the increase in formal employment and the slowdown in inflation, the average real income of the population working in the private sector has been increasing since mid-2022 and thus continued in Q3'23, despite a certain accommodation: +4.8% versus +6.5% in Q2'23 and +7.5% in Q1'23, always in relation to the same period of the previous year.
In manufacturing, in turn, real income not only grew more than that of the private sector as a whole, but also accelerated in Q3'23: +5.9% compared to +3.2% in Q2'23. Among the industrial branches, the most intense increases came from: petroleum products and biofuels; wood; vehicles; other transport equipment; machinery and equipment.
As the increase in income prevailed over the evolution of occupation, the real income of those employed in the private sector rose 5.6% in Q3'23 compared to Q3'22, which is not nothing, although it means almost half the growth rate of Q1'23 (+10.8%). For manufacturing, income performance was even more important to keep total real income up: +4.4% in Q3'23.