Brazil records 'lowest-ever' unemployment rate in 2014

By Ben Tavener

SAO PAULO

Brazil closed 2014 with an unemployment rate of 4.8 percent, its lowest on record, the country's official statistics agency, the IBGE, reported Thursday.

December also equaled the lowest ever monthly rate of unemployment of 4.3 percent, seen in December 2013. 

Seasonal temporary contracts and fewer people seeking work due to the festive period contributed to the fall in the rate of joblessness, according to the Folha de S.Paulo newspaper.

The annual jobless rate in 2013 was 5.4 percent. The IBGE has surveyed Brazil's six biggest metropolitan regions -- São Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre, Salvador and Recife -- as part of monthly unemployment reports since 2002. 

The highest annual rate seen in the series to date was 12.4 percent in 2003. 

The new labor figures have come as a surprise to many economists, who expected higher unemployment due to the country's sluggish economy. Recent surveys of analysts by the central bank predicted the Brazilian economy grew just 0.15 percent in 2014, and that it will expand even slower in 2015 at 0.13 percent.

The good news on unemployment, however, was partly overshadowed by the fact that the Brazilian government posted Thursday its first year-end primary budget deficit since records began in 1997.

Tax cuts, increased spending and failed bids to kick start the economy conspired to leave the government's 2014 budget some $6.6 billion (17.2 billion reais) in the red, excluding interest payments.

This is despite the fact that the government pledged a primary surplus of 1.9 percent of GDP in 2014. 

In 2013, the government posted a surplus of $29.4 billion (77 billion reais) -- the equivalent of a surplus of 1.6 percent of GDP.

President Dilma Rousseff's new economic team, headed by finance minister Joaquim Levy, announced that the target for 2015 will be a reduced, more achievable 1.2 percent of GDP, before bringing the target closer to 2 percent for 2016-17.

Levy has already announced a number of steps to help rebalance the government's books and bring the country's economy back to more substantial growth by boosting investor confidence and cutting public spending.

Among the measures announced, which are set to bring the government extra revenues in excess of $19 billion (50 billion reais), is a cut in social benefits and a rise in taxes -- predominantly on fuel, vehicle sales, personal credit and imported products.

The measures announced by the government are also intended to boost credibility in the Brazilian economy in the eyes of investors, and to avoid further downgrades by credit agencies after Brazil rated closer to "junk" territory last year over the country's dismal economic growth and the worsening condition of the government's fiscal accounts.

The steps taken by Levy have begun to undo policies implemented under his predecessor Guido Mantega, who was far less popular with the markets, and are set to meet resistance from some members of Rousseff's ruling Workers' Party.