BRAZILIAN EMPLOYMENT DATA

Research Edge Portfolio Position: Long EWZ

May unemployment data released by IBGE today showed the second modest sequential decline to 8.8%. As the Brazilian stimulus measures continue to be implemented, the stabilizing employment situation is a direct result of public sector job creation outpacing reduced headcounts in the manufacturing, mining and energy industries.  Unemployment levels still registered in double digits for several major urban areas, but are down across the board on a 3 year basis.

Average wages showed significant year-over-year increase with per capita household real income up 3.4% Y/Y; still trailing CPI by almost 1%, but providing the central bank with room to maneuver at their July meeting. Currently the benchmark Selic is still over 9%.

The positive data was a welcome relief to the equity market and the Bovespa finished the day up 3.7% while the EWZ ETF rose by 4%. With a cost basis of 53.83, we are still down by slightly over 1% in the long position we put on last week.

Although much needs to be done to eradicate pervasive poverty and to improve education levels we continue to be bullish on near term prospects for the Brazilian economy based on improving internal demand and global commodity dynamics.

Andrew Barber

Director

BRAZILIAN EMPLOYMENT DATA - brazil