Brazil’s economy added 157,000 jobs in June

The Brazilian economy added just over 157,000 jobs last month, according to a new reading from the Labor Ministry. The result didn’t meet market expectations. Analysts polled by financial news agency Broadcast were looking for a net 162,000 jobs created.

Year-to-date, Brazil has added just over 1 million formal jobs — a figure 26 percent lower than the same period last year. But the decline is not necessarily a bad omen. In 2022, Brazil was still recovering from the pandemic downturn, and several sectors were adding jobs as Covid restrictions were fully lifted. 

Still, Labor Minister Luiz Marinho pointed to high benchmark interest rates to explain the underwhelming numbers. “If it weren’t for the Central Bank’s inadequate [monetary policy], we would have seen 200,000 new formal jobs in June,” Mr. Marinho said.

Complaining about the country’s policy rate has been a favored weapon of the current administration to justify any shortcoming. Chief of Staff Rui Costa, for example, once said that investment in sanitation would be higher if interest rates weren’t so prohibitive.

The Central Bank has enjoyed operational autonomy since 2021, and its board is appointed for statutory terms, insulated from the political whims of the government du jour. The current board was almost entirely appointed by the far-right former President Jair Bolsonaro, with the first two directors appointed by Luiz Inácio Lula da Silva taking office only a few weeks ago.

Between March 2021 and August 2022, the Central Bank implemented one of the most aggressive monetary tightening moves in the world, taking the policy rate from 2 percent to 13.75 percent, where it stands today.

And if Brazil entered the rate-hiking business before many other economies, it can also lead the way in monetary easing. In a recent interview, Fernanda Guardado, deputy director of the Central Bank, said the authority has become more data-dependent, citing inflation projections as its main compass.

With official inflation back to target, markets expect the Central Bank to announce a rate cut of up to half a percentage point. In the U.S. and Europe, meanwhile, central banks have increased rates by 0.25 points each.