Brazil’s labor market continues to defy expectations as new data released this Friday, November 28, shows the national unemployment rate falling to 5.4%, the lowest level recorded since the current PNAD Contínua survey series began in 2012. Despite global markets operating with reduced liquidity due to the U.S. Thanksgiving holiday, Brazil stands out with what analysts describe as near-full employment.
However, beneath the headline and historic number, specialists warn that job creation is decelerating, even as the market remains historically tight.
Slowing Job Creation, Despite Record-Low Unemployment
According to the PNAD Contínua, unemployment is dropping further and is expected to reach 5.3% by the end of 2025, according to projections from labor-market economist Bruno Imaizumi of 4intelligence. But seasonally adjusted data reveals a more nuanced picture: once temporary or calendar-related effects are removed, Brazil’s unemployment rate stands at 5.8%, a low level, but one that has remained flat since July, indicating stabilization rather than continued improvement.
Economists also foresee a temporary rise in unemployment in early 2026, driven by the annual reversal of holiday-season hiring. Companies typically lay off workers in the first quarter after expanding production and sales for the Christmas period. Still, even with this seasonal uptick, Imaizumi expects the early-2026 unemployment rate to remain below the level seen in the first quarter of 2025.
Caged Data Confirms Labor-Market Cooldown
Signs of deceleration are also visible in the latest Caged report, which tracks formal employment based on company filings. In October, Brazil created 85,000 formal jobs, a 35% decline compared with October 2024 and the weakest result for the month in the past five years. The slowdown reinforces economists’ assessment that while the labor market is still hot, its momentum is gradually easing.
A Heated Labor Market Still Showing Structural Weakness
Brazil’s job market remains historically strong. Companies report difficulty finding workers, voluntary resignations have hit multi-year highs, and admission wages have risen 7%, indicating strong competition for labor. Real wages are up 4% year over year, and the real wage mass has increased by 5.5%, helping 1 million families leave the Bolsa Família program as average monthly household income climbed from R$3,000 to R$3,500.
But economists as Paulo Gala warn that Brazil’s growth is concentrated in low-complexity service sectors, with only modest industrial recovery and limited gains in productivity or technological sophistication. This pattern reflects a neoclassical growth model, where employment expands but productivity stagnates, creating structural limits for wage increases and fueling inflationary pressure.
Without productivity gains, companies protect margins by raising prices, risking an economy that may stall under inflation, unable to sustain current levels of wage growth and job creation over the long term.
Monetary Policy Outlook
Given the combination of record-low unemployment and slowing, but still tight, labor indicators, analysts argue that Brazil’s Central Bank is unlikely to begin cutting interest rates in January. A possible move may come in March or April, depending on how inflation, productivity, and labor-market dynamics evolve.
The Challenge Ahead
Brazil’s economy is generating jobs, lifting incomes, and reducing dependency on social programs — all milestones worth celebrating. But economists stress that without a shift toward higher productivity, reindustrialization, and greater economic complexity, the current cycle may be difficult to sustain.
The country now faces the critical challenge of transforming today’s labor-market strength into long-term, productivity-driven, sustainable growth.
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