Labor market indicator falls to all-time low

Fundação Getulio Vargas’ Leading Indicator of Employment (IAEmp) plummeted 42.9 points in April, to 39.7. This was the indicator’s biggest monthly decline and its lowest level since records began in 2008. In terms of quarterly moving averages, IAEmp fell 17.5 points, to 71.4.

“The coronavirus pandemic has had a growing impact on IAEmp. April’s result shows an increase in pessimism regarding the job market. Record levels of uncertainty have made entrepreneurs and consumers cautious, leading to worsening expectations for the coming months,” said Rodolpho Tobler, an economist at FGV’s Brazilian Institute of Economics (FGV IBRE).

Meanwhile, the Coincident Indicator of Unemployment (ICD) rose 5.9 points in April, to 98.4 – the largest marginal increase and highest level since December 2018, when it was 98.9 points. ICD is similar to the unemployment rate, in that the higher it is, the worse the result. In terms of quarterly moving averages, the indicator increased 2.0 points, to 94.3, reversing its previous downward trend.

“ICD’s decline was not as strong as IAEmp’s, but the recent increase in April brought the indicator close to its all-time high. In the short term, we do not expect a reversal of the negative trend that began two months ago and deepened in April,” Tobler said.

All seven components of IAEmp nosedived in April. Four of them fell at least 50 points. In particular, the components that measure expectations for the next six months and the current business situation, both in the industrial sector, dropped 76.3 and 65.1 points at the margin, respectively.

Over the same period, the increase in ICD was driven by all four household income classes. The biggest contribution to the result came from households with a monthly income of up to R$2,100 and households earning more than R$9,600, whose current local employment indicator (inverted) fell 8.7 and 7.9 points at the margin, respectively.

The complete study is available here.