Home working may be helping Brazil’s inflation ease – central bank study

BRASILIA (Reuters) – Home working in Brazil may be relieving wage pressure in an otherwise buoyant labor market, a study signed by top central bank officials and released by the Bank for International Settlements (BIS) showed on Friday.

Economic policy director Diogo Guillen and analyst Sergio Leao noted that wages were lagging pandemic levels despite a rebound in employment, with the real wages of college-educated workers seeing the most substantial decrease.

This suggests that “working from home amenities may be playing a role in releasing wage pressure during the post-pandemic recovery,” they wrote.

Brazil’s unemployment rate dipped to 7.7% in the three months to end-September, the lowest since the three months to end-February 2015.

Despite the heated job market, annual inflation resumed its downward trajectory in October, falling to 4.82%, with economists expecting the consumer price index to end the year within the central bank’s target range.

After analyzing a series of data, Guillen and Leao concluded that before the pandemic, a larger proportion of college-educated workers in the workforce was associated with an increase in real wages, but the effect has since reversed.

Ad: Save every day with Amazon Deals: Check out today's daily deals on Amazon.

“One possible explanation…is that more educated workers, who have a greater chance of working remotely, have accepted lower nominal wage growth in exchange for the amenity value of increased job flexibility,” they said.

In the minutes of its most recent monetary policy meeting – where interest rates were cut by 50 basis points for a third consecutive time to 12.25% – the central bank’s rate-setting committee, of which Guillen is a part, noted that there was no evidence of high wage pressure in labor negotiations despite the falling unemployment rate.

The central bank said it would continue to monitor earnings dynamics to better assess the degree of slack in the labor market and its potential impact on services inflation, an important variable for its policy decisions.

(Reporting by Marcela Ayres and Bernardo Caram; Editing by Steven Grattan, Kirsten Donovan)

Related posts

What’s the weather forecast for New Jersey This Weekend?

Juvenile charged in Evesham vehicle burglary spree after multi-agency search

Fatal crash under investigation after two-car collision in West View