Employment is on the rise in Brazil; but falling interest rates continue to be an obstacle

Daycoval Bank conducted a study that shows that unemployment is falling and there is high demand in some economic sectors, which is creating an obstacle to reducing the interest rate, which is currently at 10.5% per year. And since a probable reduction in international risks and the domestic situation is uncertain, the demand for the labor market may generate pressure and thus prevent a continuous reduction in the Selic rate in the short term.

Interest rates will still remain high

The Central Bank publishes its projections for the financial market on a weekly basis. These reports state that the rate will be 10.5% by the end of 2024, and that no further cuts are expected until December. The Selic rate is projected to be 9.5% for next year. The Central Bank's Monetary Policy Committee also reports that interest rates will remain high for a long time.

“Monetary policy must remain contractionary for a sufficient period of time at a level that consolidates not only the disinflation process but also the anchoring of expectations around the target.” informs the document issued by the BC.

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_{Real currency notes and economic indexes (Photo: reproduction/Javier Ghersi/Getty Images Embed)}

Unemployment falls, but prices rise

In the first three months of 2024, 1.3 million jobs with formal contracts were filled, equivalent to an increase of 26.2% compared to the first quarter of 2023. Economist Rodolfo Margato from the company XP Investimentos says that the most important market factors continue to show growth and that this encourages internal demand, especially with regard to purchasing power, causing prices to rise.

The IBGE reports that between April and June, unemployment reached 6.9%, the lowest rate since December 2014. The New Cadeg/MTE also reports that the number of people working with a formal contract reached 46.8 in June 2024, becoming the best mark since the beginning of the count in 2020.

Featured photo: person holding a work card (Reproduction/Marcello Casal Jr/Agência Brasil)