{"id":94098,"date":"2025-05-07T12:16:58","date_gmt":"2025-05-07T15:16:58","guid":{"rendered":"https:\/\/murray.adv.br\/?p=94098"},"modified":"2025-05-07T12:16:58","modified_gmt":"2025-05-07T15:16:58","slug":"informal-employment-in-brazil-hits-lowest-rate-since-pandemic","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/informal-employment-in-brazil-hits-lowest-rate-since-pandemic\/","title":{"rendered":"Informal employment in Brazil hits lowest rate since pandemic"},"content":{"rendered":"
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Economists see trend continuing despite expected slowdown<\/em><\/strong><\/h6>\n<\/div>\n<\/div>\n
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05\/07\/2025 <\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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With the exception of 2020\u2014when the onset of the pandemic triggered a wave of layoffs that hit informal workers hardest\u2014the share of informal workers in Brazil fell to its lowest level in the historical series of the Continuous National Household Sample Survey (PNAD Cont\u00ednua) in the first quarter. A strong start to 2025 in formal job creation has led economists to revise their projections and suggests that informality may continue to shrink in the coming months, even with an anticipated economic cooling in the second quarter.<\/p>\n<\/div>\n

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In the first quarter, the unemployment rate measured by PNAD rose to 7% from 6.6% in the fourth quarter of 2024. However, seasonally adjusted, the rate dropped 0.1 percentage point to 6.5%. Informal workers accounted for less than 38% of the labor force\u2014excluding the pandemic period, this was the lowest level on record. At the time, the preservation of more formal jobs skewed statistics, with informality dipping to 36.5% in the second quarter of 2020 and average real income peaking, a level only surpassed last year. The share of informal workers rose again the following year, surpassing 40% in the second quarter of 2021, but fell back below that threshold in the same period of 2022.<\/p>\n<\/div>\n

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In March, the number of informal workers declined for the fifth straight month, based on seasonally adjusted data from LCA 4Intelligence. Meanwhile, formal employment rose for the 16th consecutive month, accelerating recently, fueled by stronger-than-expected job creation. The General Register of Employed and Unemployed (CAGED) recorded a net gain of 71,500 formal jobs in March. While this was below analysts\u2019 expectations, it helped offset February\u2019s surprisingly high figure, when 431,000 jobs were added.<\/p>\n<\/div>\n

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Growth and reforms<\/strong><\/p>\n<\/div>\n

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Fernando Honorato, chief economist at Bradesco, said the strong formal job market reflects Brazil\u2019s solid economic growth\u2014GDP has expanded by 3% or more for four consecutive years since 2021. \u201cThere were major stimulus measures during this period, from both the federal government and subnational entities [states and municipalities], which spurred activity. As unemployment falls, formalization increases, because employers must offer better conditions than informal work to attract workers. This happened in the previous growth cycle and is happening again,\u201d he explained.<\/p>\n<\/div>\n

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Since that last favorable period, a series of reforms, innovations, and developments have transformed the economy and labor market, further supporting this trend, analysts say. \u201cThese are hard to separate from GDP growth effects. Joaquim Levy [former finance minister] once said we\u2019d only see the real impact of the labor reform during a strong labor cycle. And the pandemic hit right after the reform,\u201d Mr. Honorato noted.<\/p>\n<\/div>\n

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Passed in 2017, the labor reform reduced the risk of lawsuits after dismissals\u2014cases that often result in financial shocks and cause companies to shut down. As a result, businesses became more willing to hire formally, said Alessandra Ribeiro, head of macroeconomic analysis at consultancy firm Tend\u00eancias.<\/p>\n<\/div>\n

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Although the number of labor lawsuits rose again in absolute terms, exceeding 2 million in 2024, economist Bruno Imaizumi of LCA 4Intelligence pointed out that, relative to the employed population and the stock of formal workers, the share of lawsuits remains well below pre-reform levels. He believes the reform still gives employers more confidence by lowering legal risks.<\/p>\n<\/div>\n

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\u201cThis helps smaller businesses survive and hire more,\u201d he said.<\/p>\n<\/div>\n

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New contracts<\/strong><\/p>\n<\/div>\n

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Ms. Ribeiro highlighted that the reform also paved the way for new types of formal contracts, such as intermittent and temporary work. \u201cToday, these account for around 11% of formal hires in the CAGED data,\u201d she said. Other developments also contributed to this trend, including credit and capital market reforms that expanded access to financing and indirectly pushed for formalization.<\/p>\n<\/div>\n

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\u201cCompanies that go public or issue bonds need to be more formalized, provide more transparency, and minimize risks to be vetted by banks and investors,\u201d she added.<\/p>\n<\/div>\n

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Mr. Honorato said credit reforms have been a major incentive for formalization. \u201cThe creation of the TLP [Long-Term Rate], which opened space for corporate debit, and the collateral framework reform are among several changes that boosted capital markets and encouraged companies to formalize in order to benefit.\u201d<\/p>\n<\/div>\n

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Ms. Ribeiro also pointed to improvements in education and technology. Between 2000 and 2022, the share of working-age Brazilians with higher education nearly tripled from 6.8% to 18.4%, Census data shows. Additionally, digital platforms have facilitated job matching. \u201cIt\u2019s not just ride-hailing and delivery apps, but all platforms that reduce the cost of connecting employers and job seekers,\u201d she said.<\/p>\n<\/div>\n

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MEI effect<\/strong><\/p>\n<\/div>\n

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Another factor is the rise of the \u201cindividual microentrepreneur\u201d (MEI) model, which employed 6.7 million people in February. Though often viewed as a form of disguised employment\u2014an issue now under legal scrutiny after Supreme Court Justice Gilmar Mendes suspended related cases\u2014MEIs are counted as formal workers in PNAD statistics.<\/p>\n<\/div>\n

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\u201cSome app drivers and couriers are MEIs, as the government wants. It\u2019s complicated, because many value their independence and flexibility. But there are also those who opt in to access the social safety net or credit programs,\u201d said Rodolfo Tobler, an economist at the Brazilian Institute of Economics at Funda\u00e7\u00e3o Getulio Vargas (Ibre FGV).<\/p>\n<\/div>\n

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Mr. Imaizumi of LCA believes that formal job growth could continue as long as the economy stays resilient, easing fears of a sharper downturn in 2025. LCA forecasts unemployment will remain stable this year at 6.6%, with 1.4 million formal jobs created\u2014300,000 more than previously estimated. \u201cThat\u2019s fewer than in the past three years, but still a significant figure,\u201d he said.<\/p>\n<\/div>\n

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Tend\u00eancias has also revised its average unemployment forecast for 2025, lowering it from 6.9% to 6.6%. Its estimate for net formal job creation rose from 1 million to 1.5 million.<\/p>\n<\/div>\n

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(Sergio Lamucci contributed reporting<\/em>.)<\/p>\n

*By\u00a0\u00a0Marcelo Osakabe\u00a0\u00a0\u2014 S\u00e3o Paulo<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n

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