Letter IEDI n. 1146—The role of the industry in the recovery of formal employment
The beginning of 2022 has shown positive results for the labor market, with an increase in the number of employed people. The number of workers in the private sector in Q1'22 rose +11.0% compared to the same period in 2021 and reached a level 2.8% higher than that observed in Q1'20, when the first effects of the pandemic began to be felt in the Brazilian economy.
All the main economic sectors showed substantial increases in relation to a year ago, but services, where jobs fell by double-digit rates for four consecutive quarters until early 2021, led this movement in Q1'22, with +13.1%. Then came retail trade, which also had intense contractions during the pandemic, with +12.2%.
These two sectors, retail and services, benefited greatly from the expansion of COVID-19 vaccination coverage and the control of the omicron variant in early 2022, allowing for the continuation of reopening.
The manufacturing industry, where employment shrank less in the pandemic, registered growth of +8.3% in Q1'22 or 852 thousand more occupied persons than in the same quarter of 2021, equivalent to 10% of the total increase in occupation in the private sector in the period. Of the 23 industrial branches of the Pnad survey, 17 registered an increase in employment, a share of 74% of the total.
It is worth noting that formal employment was the main responsible for the increase in occupation in manufacturing. Formal employment in the sector grew +8.8% compared to Q1'21 or 583,000 more jobs. This means that 68.5% of the posts created by the industry between the beginning of 2021 and the beginning of 2022 consisted of formal vacancies, in line with the greater formalization of industrial employment (65.2%).
This fraction was much higher than that of retail trade and services, whose share of formal employment in the new jobs created was 47.9% and 31.3%, respectively. These sectors have lower levels of formality than the industry (47.2% and 39.9%), although they are not the worst by this criterion, a position occupied by construction, with 22.6%, and agriculture, with only 18% of employees with a formal contract.
In the private sector as a whole, formal jobs were 40.3% of the total vacancies created and the level of formality reached 41.5% in Q1'22, which falls to 37.9% when we exclude manufacturing jobs. That is, the industrial sector has contributed not only to the expansion of employment, but also to its formalization, since it employs mostly formal workers.
The IEDI also analyzed the behavior of formal private employment in the manufacturing industry by technological intensity ranges. As we have previously shown, as in Letter No. 1145 of May 27, 2022, the high-tech industry has already accumulated a sequence of negative output figures for three quarters in a row. This has had an impact on its level of employment, with double-digit drops for four quarters, with -14.9% in Q1'22 compared to Q1'21.
In contrast, the medium-low technology industry has seen production improve recently, helped by the positive phase of commodity prices. As a result, its formal work increased 12.3% in Q1'22, driven by the food (+12%), clothing (+25.7%) and metal products (+22%) branches, among others. In the intermediate technology intensity ranges, the result early this year was +8.1% on medium and +6.6% on medium-high technology.
As for the average real income of those employed in the private sector, there was a 6.0% decrease between Q1'21 and Q1'22, due to the acceleration of inflation and the dynamics of the nominal income usually received. In this case, manufacturing underperformed the rest of the private sector, registering a 6.8% decline. Retail (-2.8%), agriculture (+1.8%) and construction (+5.8%), among others, softened this movement.
Even so, the average real income paid in the manufacturing industry remained above the average for the private sector as a whole. In Q1'22, it was 4.6% higher and in the aggregate of the last twelve months, 6.0% above the total. Compared to the sectors with the best evolution mentioned above, the average industrial income is even higher: 13.4% above retail's income, 16% above construction's and 44.8% higher than agriculture's.