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Brazil's Labor Market Hits Record Low for Underused Workers

Public-sector hiring plus income gains are draining available workers, keeping wage pressure high and limiting the central bank's room to cut rates.

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Overview

  • The IBGE Pnad Contínua, released Friday, showed subutilization — the share of people unemployed, working too few hours, or available but not actively searching — fell to a record 13.3% for the quarter ended May and unemployment stood at 5.6%.
  • Employment rose by about 558,000 between March and May, with roughly 455,000 of those additions in the public sector and many temporary or informal positions that weigh on average earnings measures.
  • Real average monthly pay reached R$3,726 for the quarter ended May, near the top of the Pnad series, as tighter labor supply pushes wages even while some public hires reduced group averages.
  • Informal work remains high at nearly four in ten jobs and regional gaps persist in the North and Northeast, so gains are uneven and many workers remain in vulnerable positions.
  • Economists warn that the shortage of available workers is feeding wage-driven inflation, which helps explain why the central bank faces limited scope for rapid cuts to the Selic rate currently near mid-2026 levels.