Brazil's labor market showed unexpected strength at the start of 2025 with the creation of 137,303 formal jobs according to data from the Cadastro Geral de Empregados e Desempregados (Caged) revealed on Wednesday, January 26. This result, the best recorded for the last three months, was generated from 2.27 million admissions contrasted against 2.13 million discharges across the country.
"We begin the year with quality job generation, and our objective is to sustain this growth throughout 2025," stated Luiz Marinho, Brazil's Minister of Labor and Employment. He added, "Aiming to match the high levels achieved last year, we anticipate continued positive trends." Despite the growth, this month's figure is lower than January 2024's creation of 173,233 jobs.
The sectors contributing to job creation were led by the Industry, which generated 70,428 new jobs, followed by Services with 55,175, Construction at 38,373, and Agropecuária (Agriculture) with 35,754 jobs. The only sector witnessing negative growth was Commerce, with 52,470 fewer jobs this month.
Regionally, four of Brazil's five geographic areas recorded positive job creation. The South region was highlighted as the top job generator, with 65,712 new positions, followed by the Central-West with 44,363, Southeast with 27,756, and North with 1,932. The Northeast recorded negative growth, shedding 2,671 jobs.
Job performance varied across states, with 17 out of 27 federal units finishing the month positively. São Paulo led with an addition of 36,125 positions, followed by Rio Grande do Sul with 26,732 posts and Santa Catarina with 23,062. Notably, female workers accounted for nearly 80% of the new formal jobs created.
Regarding educational qualifications, those with completed secondary education made up the largest group of new jobs at 83,798. Meanwhile, the youth demographic aged between 18 and 24 years accounted for 79,784 of the new engagements. The average monthly salary for new positions was reported at R$2,265.01, up by R$89.01, marking a 4.12% increase from December 2024.
While the employment figures seem promising, they have sparked caution among investors. The market reacted negatively to the data as they perceive the strong job growth could exacerbate inflationary pressures, prompting concerns over prolonged high-interest rates. Following the release of the job data, the Brazilian real depreciated, rising to R$5.7935 against the dollar, pushing up interest rates across the curve.
The recent increase in employment has led to predictions of tighter monetary policies, contrasting with the economic strategies anticipated from the U.S. economy, where interest rate cuts are expected. This notion has created volatility within Brazil's financial markets, including the Ibovespa index, which saw decreased performance by 0.45% around the same time.
"The strong creation of jobs often brings about increased consumption, which can lead to more inflation and eventually results in heightened interest rates," commented Luiz Roberto Monteiro, an institutional desk operator. The past month's job report was considerably higher than the median expectation of 50,500 jobs from market analysts before the release.
Despite the mixed response from investors, the general sentiment may shift favorably with upcoming financial releases across major companies, including prominent firms like Ambev and Petrobras expected to announce results soon. Optimism surrounding job creation and corporate earnings may curtail some apprehension, as well.
Today's economic environment showcases not only Brazil's recovery post-pandemic but also the strategic approaches the government is adopting to facilitate sustainable growth. While immediate reactions suggest uncertainties, the long-term outlook depends significantly on concrete fiscal policies and international economic conditions.