Labor market: affected by COVID-19, indicator signals sharp rise in unemployment

“The March result shows the first effects of the coronavirus pandemic on the job market. This was the second biggest drop since records began, behind only the 2008-09 crisis. The outlook is likely to remain negative in the coming months, given the growing level of uncertainty in the country,” says Rodolpho Tobler, FGV IBRE economist.
Economics
08 April 2020
Labor market: affected by COVID-19, indicator signals sharp rise in unemployment

Fundação Getulio Vargas’ Leading Indicator of Employment (IAEmp) fell 9.4 points in March, to 82.6 – the lowest level since reaching 82.2 in June 2016. Despite this decline, the quarterly result is 1.0 point higher than in the previous quarter. In terms of quarterly moving averages, the indicator ended a positive trajectory by falling 2.4 points in relation to February.

“The March result shows the first effects of the coronavirus pandemic on the job market. This was the second biggest drop since records began, behind only the 2008-09 crisis. The outlook is likely to remain negative in the coming months, given the growing level of uncertainty in the country,” says Rodolpho Tobler, FGV IBRE economist.

The Coincident Indicator of Unemployment (ICD) rose 0.6 points in March, to 92.5. The higher ICD is, the worse the result (like the unemployment rate). However, in terms of quarterly moving averages, the downward trend is still intact for now, with a 0.9 decrease.

“ICD recorded a slight increase after three months of positive results. The effects of the coronavirus did not have a significant impact on consumers in March, given that the first social isolation measures were only taken on March 15. However, it is possible to assume that the indicator will worsen in the next few months, as the economic impacts become clearer,” Tobler says.

All seven components of IAEmp declined in March, while five of them fell at least 7.0 points. In particular, the component that measures expectations for the next six months and the component that measures the current business situation, both in the services sector, dropped 24.0 and 15.0 points at the margin, respectively.

Over the same period, the growth in ICD was driven by three of the four household income classes. The biggest contribution to ICD’s result came from households with a monthly income of between R$2,100 and R$4,800, whose current local employment indicator (inverted) fell 4.6 points at the margin.

The complete study is available here.