Transformations and tendencies of the labor market in Brazil between 2001 and 2015: paradox of the low unemployment?

Abstract

The Brazilian economy, boosted by the commodities super-cycle, had a decade of growth and macroeconomic stability, in which the labor market performed very favorably. However, there was a slowdown in the GDP, followed by a strong recession in 2015 and 2016. There was a large gap between the beginning of the economic slowdown and its first effects on the labor market, the so called paradox of low unemployment. The objective of this paper is to analyze this phenomenon using the two main surveys carried out by the Brazilian Geography and Statistics Institution (IBGE) that deals with this subject, the Pesquisa Nacional por Amostra de Domicílios (PNAD) and the Pesquisa Mensal de Emprego (PME). Using the unemployment rate variation decomposition methodology, the results show that the most expressive part of both, the previous reduction and the current increase of the rate, took place in the metropolitan areas, and that a great part of this behavior can be explained by the reduction of the participation of both young and less educated workers and the reduction in the pace of women’ insertion in the labor market. The age profile of unemployment in Brazil has become younger, raising concerns of an emerging “lost generation”.