This Letter IEDI is part of the periodic monitoring that the Institute carries out on employment and income of those working in the Brazilian private sector, with an emphasis on manufacturing. The study is based on the microdata of the Continuous PNAD released by the IBGE and, in this edition, highlights the performance in 2023, in particular in the last quarter of the year.

As we have already noted on other occasions, the 2023 contribution to the situation of employment came less from the pace of new job creation and more from qualitative aspects, such as the more robust expansion of formal jobs, and the increase in real labor income. The industry, despite the low dynamism of its production, helped in this process.

In the private sector as a whole, after increases of 6.1% in 2021 and 7.8% in 2022, the expansion of occupation decelerated to 1.8% in 2023. It should be noted that, in 2022, the number of people employed had already recovered from the adverse shock caused by the pandemic: in the quarterly average for the year, it was 4% above that of 2019, advancing in 2023 to 5.3% above the 2019 mark. 

Another factor that contributed to such a slowdown was that, last year, the best economic performances were registered by activities that, in general, do not employ many people. That is, their good result does little to improve the employment and income situation of households.

Let's look at the two main GDP highlights of last year: agriculture, with an increase of 15.1%, and extractive industry, with +8.7%, as discussed in the IEDI Analysis of March 01, 2024. In the first case, the participation in total private employment in 2023 was 9.5% and in the second case, only 0.6%.

The low participation of the extractive sector, which is a known capital-intensive activity, reduced the aggregate impact of the significant increase in the number of its employees: +8.3%, making it the number one sector in job creation in 2023. 

On the other hand, despite the greater weight of agriculture, it has repeatedly been cutting jobs, given its mechanization. As a result, the double-digit increase in agricultural GDP in 2023 was accompanied by a 5.0% decrease in the number of employed people, greatly intensifying the 1.6% decline of 2022. 

Thus, once filled the gap caused by the pandemic and given the low capacity to generate jobs in the most dynamic sectors, it was expected that there would be some slowdown in the increase in job creation in 2023. Note that this process of accommodation was not stronger only because the services sector, although slowing down, continued to grow and compensate for the evolution of other activities.

In 2023, the number of people employed in services registered +3.9%, that is, three times higher than the rise in the private sector as a whole. Important in the expansion of employment in general, services contributed proportionally less to what marked last year: the qualitative improvement of jobs due to the advance of formal work.

Of the additional 1.5 million new workers in the services sector in 2023, a minority share of 44% were formally employed (+675 thousand). The role of leveraging formal jobs falls on other sectors, such as the industry, although it is not as labor-intensive as services and despite the weak evolution it presented last year.

Even though it was the economic sector that fared worst in 2023, with a 1.3% drop in GDP and a 1.0% contraction in physical production, manufacturing employment rose 0.4% in relation to 2022, pulled by 57% of its branches. Formal jobs in the sector grew 2.0%. The branches of medium technology intensity were the ones in which formal work increased the most (+6.0%).

It is worth mentioning that, together with services, manufacturing was the only private sector activity analyzed in this Letter that maintained an increase in employment since the pandemic, including in the comparison between Q4'23 and Q4'22 (+0.5%). The difference is that while its level of activity fell, services' GDP and real revenue expanded last year.

In absolute terms, the number of additional formal workers in manufacturing (+150 thousand) was 3.5 times greater than the increase in the total number of people employed in the sector, which means a higher rate of formalization in this part of the industry. 

In 2023, the share of formal jobs in the manufacturing industry’s total private employment was 66.6%, with an increase of 1.0 percentage point compared to 2022 and well above the rates of agriculture (20%), services (39.8%) and the average of the private sector in general (42.6%).

With this evolution, the manufacturing industry contributed with a fraction of 4% of the total increase in private employment in 2023, but with 12% in the expansion of the number of employees with a formal contract in the private sector. 

If Brazil were a more industrialized country with better conditions to boost the growth of manufacturing output, its employment picture would be qualitatively better. 

It should be noted that formal jobs, in addition to giving families protection in the event of illness, unemployment or after the end of their working lives, also boost consumption and, consequently, general economic dynamism, since they generate a regular flow of income, greater access to credit and better financial planning for households.

Retail trade, in turn, also generated proportionally more jobs with a formal contract in 2023, but in this case, unlike the industry, its total private employment stagnated last year (+0.1%) and even contracted in the comparison between Q4'23 and Q4'22 (-0.3%). 

The second prominent development of 2023 concerns the real income of employed people, favored by the advance of formal work and, especially, by the slowdown in inflation. The increase last year was of 5.5%, well above that of 2022 (+0.9%).

In manufacturing, there was a change in sign. The 2.7% drop in 2022 led to a 4.6% increase in 2023, with an acceleration at the end of the year: +5.9% in Q4'23 versus Q4'22. In this last comparison, the average real income in the private sector showed, in contrast, a slowdown, to +3.3%.

The full text is available in Portuguese.