Economic Slowdown and Job Loss

The growing concern about the Formal Jobs in Brazil it intensifies, especially in the second half of 2023. The Brazilian economy shows signs of slowdown, reflected in the sharp drop in the generation of new jobs.

Economic Slowdown in the Second Half of 2023

The Brazilian economy faces a significant slowdown in the second half of 2023, reflecting the 32% drop in formal job creation in July, with only 129,775 new jobs created, the lowest rate since 2020. Furthermore, default rates showed an alarming increase, rising from 6.3% to 6.5% between June and July, indicating growing financial hardship for consumers.

With the Selic rate maintained at 15% per year, the scenario becomes even more challenging for economic activity and the creation of new jobs.

Decline in Formal Job Creation in July 2023

The reduction of 32% in formal job creation, totaling 129,775 vacancies in July 2023, stands out as a worrying sign for the Brazilian labor market.

This slowdown highlights how high interest rates negatively impact economic activity, making hiring more expensive for companies.

Furthermore, the drop in job creation is the lowest since 2020, leading to an environment of economic uncertainty.

This downturn poses significant challenges, as delinquency increases, especially in credit card revolving credit., puts even more pressure on the economy.

Default rates that rose from 6.3% to 6.5% between June and July illustrate additional difficulties faced by the population.

Thus, the combination of high interest rates and increasing default rates shape an unfavorable scenario for the future, highlighting the need for effective economic strategies.”

Growth in Default and Impacts on Credit

In July 2023, the default in Brazil reached record levels, with an increase from 6.3% to 6.5% compared to June.

In particular, credit card revolving credit has become a major challenge, reaching an exorbitant annual interest rate of 446.6%, according to the Central Bank.

The impact of this increase in default rates goes beyond the economic, creating significant social tensions and increasing pressure on families already facing financial difficulties.

A high revolving credit card rate exacerbates the situation, leading to challenges in consumption and access to credit.

Comparison of Job Creation up to July 2023

By July 2023, Brazil had registered the creation of 1.347 million formal jobs, representing a significant reduction of 10.3% compared to the same period in 2022. This drop directly reflects the current economic scenario, where high default rates and high interest rates inhibit the growth of the labor market.

In fact, the CNN Brazil highlighted that the economic pressure directly influences the ability to generate new opportunities.

A comparison between 2022 and 2023 highlights this trend:

It is hoped that more flexible economic policies can reverse this trajectory.

Selic at 15%: Restrictive Effects on Economic Activity

Maintaining the Selic rate at 15% per year poses enormous challenges to the Brazilian economy.

This high level, the highest in almost 20 years, has a direct effect in families' pockets and in companies' coffers.

The big consequence of this is the increase in the cost of credit, which inhibits family consumption and reduces business investment.

As companies avoid taking on new debt due to high interest rates, the generation of formal jobs reduces by 32% in July 2023, a considerable figure compared to previous years.

This situation is aggravated by the increase in default, which reaches 6,5% between June and July of this year, becoming a record level and putting even more pressure on the economic scenario.

These factors create a cycle of financial constraints that hinder growth.

With 1.347 million jobs created by July, the numbers are still 10.3% smaller than in the same period of the previous year, clearly demonstrating the adverse effects of a restrictive monetary policy.

In summary, the current scenario of Brazilian economy and the turbulence in the generation of formal jobs indicate significant challenges ahead.