Brazil posted a lower than expected jobless rate of 7.6% in January. In seasonally adjusted terms, the jobless rate fell to 7.8%, as compared with December's 8.2%. This was the first decline in the past 12 months. However, the drop in the unemployment rate is not positive news as it was due to a drop in the active labor force that fell 0.5% m/m in seasonally adjusted terms. The drop in jobless people of 5.3% m/m sa was not reflected in the increase in employed people that fell 0.1% m/m sa. This indicates that jobless people gave up looking for a job.

Average real wages fell 1.7% m/m sa that made the whole real wage bill shrink by 9.9% y/y, as compared with the average of 5.2% in January 2015, and on par with the last three-month average of 10.2% y/y. The decline of labor market continues to be noticeable and implies that the trend will not be reversed.

"The decrease in active labor force and continued reduction of real wages, close to double-digit contractions, corroborates our view that household consumption will be the largest negative contribution to the real GDP contraction of 2.8% that we forecast for this year", says Barclays.