Labor market: Indicators show decrease in pessimism and caution in June

Despite the second consecutive increase in LIEmp, this result is still the third lowest since records began and it needs to be interpreted with caution. The improvement in the indicator suggests a decrease in pessimism about the labor market in the coming months and that the worst moment seems to be behind us.

Fundação Getulio Vargas’ Leading Indicator of Employment (LIEmp) rose 14.0 points in June, to 56.7 points. In May and June, it recovered 33% of its losses in March and April. In the three months to June, LIEmp fell 8.6 points to 46.4 points – an all-time low since records began in 2008.

“Despite the second consecutive increase in LIEmp, this result is still the third lowest since records began and it needs to be interpreted with caution. The improvement in the indicator suggests a decrease in pessimism about the labor market in the coming months and that the worst moment seems to be behind us. However, high uncertainty about control over the pandemic and the shape of the economic recovery are still factors that cause concern and may limit the continuity of employment recovery,” said FGV IBRE economist Rodolpho Tobler.

The Coincident Indicator of Unemployment (CIU) fell 2.2 points in June, to 97.4 points, after rising 7.7 points between March and May. CIU is an indicator that is similar to the unemployment rate, in that the lower the number, the better the result. In terms of moving three-month periods, there was an increase of 1.7 points, to 98.5 points.

“Despite the positive result in June, the indicator remains at a high level, suggesting that it is not yet possible to imagine an improvement in the unemployment rate in the short term,” Tobler said.

All seven components of LIEmp rose in June, after hitting a low in April and stabilizing in May. These indicators rose more than 17 points, while Forecast Employment and the Current Business Situation in Manufacturing went up 24.2 and 20.7 points, at the margin, respectively.

Over the same period, the drop in CIU was influenced by all four household income classes. The biggest contribution to the result came from the household class with monthly income between R$2,100 and R$4,800 and the class receiving up to R$2,100, whose Current Local Employment level (inverted) went up 3.5 and 2.8 points, at the margin.

The complete study is available here.