As Brazil Unemployment Hits Record High, Rio's Murder Rate Soars

With Brazil stuck in what may be its worst depression on record, it will surprise nobody that the homicide rate in Rio de Janeiro climbed by 20% in 2016 from the previous year, as violence soared in the Brazilian metropolis amid rising unemployment and sharp cuts in public security budgets. Worse even than Chicago, state security statistics released on Wednesday and cited by Reuters showed that 5,033 people were murdered in Rio during the year, up from 4,200 in 2015.

The figures confirm growing concerns in Rio, a city and surrounding state home to more than 16 million people, that hard-won gains in security over the past decade are quickly backsliding along with Brazil's economy, now in its worst recession on record.

 

Despite a massive deployment of more than 80,000 soldiers and police officers who ensured public order when the city hosted the Olympic Games in August, Rio and its suburbs suffered from an increase in violence throughout much of the rest of the year.

The increase in violence was particularly sharp in the so-called Baixada Fluminense, a dense sprawl of blue-collar suburbs inland from central Rio and home to much of the city's workforce.

Meanwhile, residents of central Rio continue to worry about growing violence in the many slums that dot the city. Many of those areas, where police had successfully displaced some criminal gangs in the lead-up to the Olympics and the 2014 World Cup, are now roiled by efforts by gangs to retake turf and regain access to markets for illegal drugs.

Rio is one of several Brazilian states suffering from gaping budget deficits. The state government, which has struggled to pay police, doctors and teachers in recent months, slashed its overall security financing by more than a third in 2016, and shortly before the Olympics declared a fiscal emergency when it literally ran out of money.

And with the nation's morbund economic state the primary driver behind the surge in violence, it appears that Brazil's woes are not going away any time soon because earlier this week, the government erported that the labor market deteriorated further in December, with the unemployment rate reaching 12.0% as a result of 12.3 million unemployed workers (up from 9.1mn a year ago), and the real wage bill declining 1.2% yoy (up from -2.0% yoy in November). In seasonally adjusted terms the unemployment rate rose to another record high: 12.5%.

Some more details courtesy of Goldman:

  • Employment declined 2.1% yoy in the 3-month period ending in December (down from the -1.8% yoy average during Jan-Nov). The economically active labor force expanded 1.3% yoy (up from 1.1% yoy in November and equal to the 1.3% yoy increase of the working age population). The labor force participation rate improved to 61.4% in December from 61.3% in November (and 61.4% a year ago). Average real wages increased 0.5% yoy (from -0.5% yoy in November), supported by moderating inflation.
  • Formal salaried employment in the private sector expanded 1.1% yoy, while employment in the informal sector shrank 3.8% yoy. Self-employment declined 3.5%. By sector of economic activity, industrial employment retrenched by 7.7% yoy (955 thousand jobs), and employment in the construction sector declined 10.8% yoy (857 thousand jobs).
  • Average real wages increased 0.5% yoy in December (up from -0.5% yoy in November as inflation decelerated from 7.0% yoy in November to 6.3% yoy in December), with average real wages of the self-employed down 3.5% yoy and of those working in the informal sector down 3.8% yoy. The overall real wage bill of the economy declined 1.2% yoy in December.

Sadly it seems that the Olympics curse has struck again, leaving yet another host nation in a state of socioeconomic dire straits.