.Brazil’s Unemployment Rate Fell in May to Record Low 6.4% as Wages Rise

Brazil’s unemployment rate fell to the lowest ever for the month of May as companies in Latin America’s biggest economy hire workers to meet growing domestic demand.

The jobless rate fell to 6.4 percent in May, from 7.5 percent a year earlier, the national statistics agency said today in a report distributed from Rio de Janeiro. The jobless rate, which was unchanged from April, matched the median forecast in a Bloomberg survey of 32 analysts.

“We are still at full employment,” Luciano Rostagno, chief strategist at CM Capital Markets CCTVM Ltda, said in a phone interview from Sao Paulo. “This gives the central bank a reason to raise interest rates again in July.”

Record low unemployment coupled with a “substantial” increase in wages are an “important risk” for inflation and a driver of economic growth, central bank policy makers said in the minutes of their June board meeting. Companies ranging from investment banks to fast-food chains plan to expand their businesses in Latin America’s biggest economy even as the government raises interest rates and curbs credit expansion to cool the fastest inflation in six years.

The yield on interest rate futures maturing January 2012, the most traded in Sao Paulo, slipped one basis point, or 0.01 percentage point, to 12.44 percent at 8:34 a.m. New York time. The real weakened 0.2 percent to 1.5893 per U.S. dollar.

The 6.4 percent unemployment rate in May was the lowest for the month since the statistics agency began tracking joblessness in Brazil’s six biggest metropolitan areas in 2002. Average real wages rose 4 percent from a year ago, a 1.1 percent from April, to 1,567 reais ($988) per month.

Quiznos, Banks
Quiznos, the closely held Denver-based sandwich chain, plans to open 200 locations in Brazil over the next 7 to 10 years to boost growth. Burger King Holdings Inc. said this month it aims to reach 1,000 restaurants in Brazil in the next five years, up from 108 now.

The Bank of New York Mellon Corp. (BK)’s Brazil unit intends to boost its staff by more than 20 percent this year to expand operations in the South American country, President Zeca Oliveira said May 19.

Policy makers have increased the benchmark interest rate four times this year to 12.25 percent, slashed spending by 50.7 billion reais ($31.9 billion) and increased taxes on consumer credit as they seek to bring inflation back to their 4.5 percent target next year.

Consumer prices in the 12 months through mid-June quickened to 6.55 percent, the national statistics agency said yesterday. Inflation has remained above the upper limit of the bank’s 2.5 percent to 6.5 percent target range since April. On a monthly basis, inflation slowed to 0.23 percent in mid-June from 0.7 percent in the previous month’s reading, the agency said.

Central bankers said in the minutes of their June meeting they are ready to raise rates for a “sufficiently long” period even as the country’s inflation outlook shows signs of improving.