Workin’ Man Blues
• There seems to be a widespread
belief that Brazilian potential GDP growth stands at 4% to 4.5%, transparent
not only in consensus forecasts suggesting that growth should trend back to
those levels in the next couple of years, but also in government promises to push growthgovernment to more than 4% in 2013;
belief that Brazilian potential GDP growth stands at 4% to 4.5%, transparent
not only in consensus forecasts suggesting that growth should trend back to
those levels in the next couple of years, but also in government promises to push growth
• Whereas I shared these beliefs
until not long ago, some developments, chiefly in the labor market front, have
led me to question them. Indeed, growth during that period was accompanied by a
significant reduction in unemployment rates. Yet, the very definition of
potential growth associates this concept to unchanged unemployment rates, as
long as the NAIRU (non-accelerating inflation rate of unemployment) remains
itself constant;
until not long ago, some developments, chiefly in the labor market front, have
led me to question them. Indeed, growth during that period was accompanied by a
significant reduction in unemployment rates. Yet, the very definition of
potential growth associates this concept to unchanged unemployment rates, as
long as the NAIRU (non-accelerating inflation rate of unemployment) remains
itself constant;
• Indeed, employment growth
averaged 2.5% per annum from 2003 to 2010, well in excess of working population
growth, around 1.5% per annum, but declining in recent years to 1.2% per annum;
averaged 2.5% per annum from 2003 to 2010, well in excess of working population
growth, around 1.5% per annum, but declining in recent years to 1.2% per annum;
• We estimate that, if growth
reaches 1% per quarter in the second half of 2012 and remains at this pace until
the end of 2014 (leading to annual growth around 4% per annum) unemployment
would reach as low as 3.5% in late 2013 and around 2% at the end of 2014. Given
the current evolution of nominal wages, when unemployment hovers around 5.5%,
it is not difficult to conclude that this would lead to wage growth well beyond
any level consistent with inflation close to the target in 2013 and 2014;
reaches 1% per quarter in the second half of 2012 and remains at this pace until
the end of 2014 (leading to annual growth around 4% per annum) unemployment
would reach as low as 3.5% in late 2013 and around 2% at the end of 2014. Given
the current evolution of nominal wages, when unemployment hovers around 5.5%,
it is not difficult to conclude that this would lead to wage growth well beyond
any level consistent with inflation close to the target in 2013 and 2014;
• As a matter of fact, we have
estimated in previous research that (trend) productivity growth has remained
around 1.5% per annum, a figure that suggests that the bulk of GDP growth
during these years has come from the incorporation of those previously
unemployed into the workforce. Yet, this process cannot go forever: without
further productivity acceleration output growth will eventually converge to
population plus productivity, well below the 4-4.5% per annum believed to be
potential growth;
estimated in previous research that (trend) productivity growth has remained
around 1.5% per annum, a figure that suggests that the bulk of GDP growth
during these years has come from the incorporation of those previously
unemployed into the workforce. Yet, this process cannot go forever: without
further productivity acceleration output growth will eventually converge to
population plus productivity, well below the 4-4.5% per annum believed to be
potential growth;
• This reasoning departs from the
notion that the NAIRU remained unchanged throughout the period, but it is
possible to build a case of a “structural” reduction of the NAIRU arising from
the construction boom, expressed byconstriction construction GDP surpassing overall GDP by 0.7%
per annum since 2003, whereas it lagged GDP in previous years;
notion that the NAIRU remained unchanged throughout the period, but it is
possible to build a case of a “structural” reduction of the NAIRU arising from
the construction boom, expressed by
per annum since 2003, whereas it lagged GDP in previous years;
• We made an attempt to build a
“counterfactual”, namely what would unemployment be in case there was no
construction boom, and estimate that it would be about 0.6% higher than
observed in 2012. This is relevant, but accounts to less than 10% of the
reduction of unemployment observed between 2003 and 2012, suggesting that the
bulk of unemployment decline in the period indeed resulted from output growth
beyond potential.
“counterfactual”, namely what would unemployment be in case there was no
construction boom, and estimate that it would be about 0.6% higher than
observed in 2012. This is relevant, but accounts to less than 10% of the
reduction of unemployment observed between 2003 and 2012, suggesting that the
bulk of unemployment decline in the period indeed resulted from output growth
beyond potential.
Alex, não se pode argumentar que outro fator que pode ter sido responsável por uma suposta queda da NAIRU no período recente é o maior peso do setor de serviços, que é intensivo em trabalho, no pib em detrimento de um menor peso da indústria, que é intensiva em capital?
Aproveitando a oportunidade, você partilha da crença de que a diminuição do custo energético no ano que vem levará a uma queda de meio ponto do ipca?
"Construction GDP" in the next to last paragraph, I suppose. No need to publish this comment, just noticing a typo if I understand correctly.
Valeu Felipe! Já corrigido (assim como outro no primeiro parágrafo)