ECONOMIC RESEARCH

October 27, 2011

Brazil Employment
]

According to the Brazilian Institute of Geography and Statistics (IBGE), Brazil's unemployment rate dropped from 6.0 percent in August to xx percent in September, above/below our expectation and market consensus of a drop to 5.8%. Compared to the same month of 2010, the unemployment rate of December was xx p.p. lower. Again, the drop in unemployment was led by a strong drop in unemployed population, -7.95% compared to previous month, and not by a significant increase in employed population, which rose only 0.23% MoM. Adjusting for seasonal factors, the unemployment rate actually rose from 5.9% to 6.0%, its first increase since last May. Average real income (adjusted for seasonal effects) dropped/raised to R$ 1,515.38, down/up 0.61 percent from August and real salary mass (also adjusted for seasonal effects) dropped/raised 0.10 percent. Compared to the same month of last year, average real income is up 5.92 percent and real salary mass 9.7 percent. Our view is that, after a strong year, the job market in Brazil is finally loosing momentum which might bring some relief to inflation ahead. It is important to note, however, that the unemployment rate is still far below the natural unemployment rate of the Brazilian economy, which according to our calculations is around 7.2%, suggesting that the job market will exert pressure on inflation for quite some time yet. Either way, we see this new increase in seasonaly adjusted unemployment as a sign that domestic demand might cool down along the year.

Luciano Rostagno 55 11 5504 9981 luciano_rostagno@westlb.com.br

Victor Alves 55 11 5504 9741 victor_alves@westlb.com.br

WestLB Brazil
Av. Eng. Luiz Carlos Berrini 716. 8th floor 04571-000 Sao Paulo Brazil

Figure:
Unemployment Rate 11 Unemployment Rate (S.A.) 10

Figure:
1650 Average Real Income (s.a.) Real Salary Mass (s.a.) 1600 Real Salary Mass Index (Dec02 = 100) 135 Average Real Income (R$) 140 145

9 %

1550 130

8 7

1500

125

120 1450 115

1400 110

5
Ja M n-0 a 7 M r-0 ay 7 Ju -07 Se l-0 7 Nop- 0 7 Ja v-0 7 M n-0 M ar-08 ay 8 J -08 Seul-0 8 Nop- 0 8 Ja v-0 8 M n-0 9 M ar-0 ay 9 Ju -09 Se l-0 9 Nop- 0 9 Ja v-0 9 M n-1 a 0 M r-1 ay 0 J -10 Seul-1 p 0 No - 1 0 Ja v-1 0 M n-1 ar 1 M -1 ay 1 J -11 Seul-1 p- 1 11

1350 Oct-10 Oct-09 Oct-08 Oct-07 Jan-09 Jan-10 Jan-11 Jan-08 Jan-07 Jul-07 Jul-08 Jul-09 Jul-10 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Jul-11

105

Source: Bloomberg, WestLB Research.

Source: Bloomberg, WestLB Research.

ECONOMIC RESEARCH

October 25, 2011

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