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Thursday, June 21, 2007

Unemployment in Brazil

The contents of this Bloomberg article this morning makes the demographic component in economic growth pretty clear I feel:

Brazil's unemployment rate was unchanged in May from the previous month as quickening economic growth prompted more people to come into the workforce, offsetting gains in hiring.

Unemployment in Brazil's six largest metropolitan areas was 10.1 percent, the national statistics agency said, higher than the median forecast of 9.9 percent in a Bloomberg survey of 16 economists.

``Unemployed people are looking for jobs as the positive outlook for the economy boosts companies' confidence to spend more on hiring,'' Sandra Utsumi, chief economist with BES Investimentos in Sao Paulo, said in a phone interview. ``Even though the jobless rate didn't drop, the perspective for the labor market is positive as the economy is growing.''

The difference with Germany, Japan etc (or Latvia, Lithuania for that matter) couldn't be clearer. The rate in Brazil doesn't fall dramatically with growth due to the large numbers of younger people who are continuously coming online.

Companies are hiring more as slowing inflation, lower interest rates and rising family incomes encourage consumers to boost their spending, said Utsumi. Market analysts expect the economy to grow 4.25 percent this year and 4 percent in 2008 compared with 3.7 percent in 2006, according to the median estimate a June 15 central bank survey.

Brazil's central bank slashed the benchmark interest rate to 12 percent, a record low, on June 6 from a 19.75 percent in September 2005, as inflation reached the lowest level in eight years.

Meanwhile back in Latvia annual wage inflation is running at 33%.

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