MercoPress. South Atlantic News Agency

Job creation in Brazil down, but unemployment still at record lows

Minister Mantega has said that increasing productivity is one of the country's main challenges

Brazil's economy added a net 58,836 payroll jobs in May, the Labor Ministry said, which is the worst figure for May since 1992. Brazil added 105,000 jobs in April.

 The pace of job creation has slowed in Brazil after three years of meager growth, but unemployment remains around record lows as more Brazilians opt to dedicate time to education and training. The rate is measured anywhere between 5% and 7%, depending on the index.

Economic growth for this year is forecast at a meager 1.2%, down sharply from 7.25% in 2010.

The low level of unemployment is also helping boost salaries in labor-intensive sectors. That is one reason why inflation isn't slowing down even though the central bank has increased borrowing costs and the economy has slumped.

The 12-month IPCA consumer-price index was at 6.4% in May and is forecast to remain at around that level for the rest of the year. The central bank's inflation target is 4.5%, with a tolerance range of two percentage points in either direction.

Service prices in Brazil rose 8.2% in February from a year earlier, according to the latest central bank report on inflation. The millions of Brazilians who have gotten jobs and joined the country's middle class are boosting demand for hair salons, restaurants and other services and are adding to salary pressures even as skill levels remain low.

Finance Minister Guido Mantega has said that increasing productivity is one of Brazil's main challenges. The government has created school programs to train more technical workers and is increasing the amount of funding funneled to education.

But the initiatives are relatively new and their results aren't likely to be felt in the short term, economists say. Some relief for employers could come from recent reductions in payroll taxes.

“We hope that the [tax] measures will help job creation,” Labor Minister Manuel Dias told reporters as he commented May payroll figures. “We didn't stop hiring and we want to continue”.