After 2nd straight rise, services have room to grow and help jobs, analysts say

O second consecutive growth from the sector of services registered in June reflects the positive effects of the post-pandemic normalization of economic activity, and the movement has had a positive impact on the fall in unemployment, say experts to the CNN Brasil Business .

In June, the sector had a high of 0.7%, above the market’s expectation of 0.4%. As a result, it has accumulated growth of 2.2% since March, and is 7.5% above the pre-pandemic .

The trend is that services still have room to grow, also helped by measures to stimulate the government’s economy, but with a risk of a slowdown amid the combination of fees and inflation high.

services and employment

The recovery of services has a direct relationship with the fall in the unemployment currently in lowest level since 2015 due to the weight of the sector in the economy, according to Rodolpho Tobler, from FGV-Ibre.

“People have managed to restore their purchasing power even with the lowest average income, which helps to have a more heated activity, and expectations have been revised upwards”, he observes.

Among the service segments, he highlights those provided to families, such as restaurants and hotels, whose growth is linked to the post-pandemic context and the complete recovery of the economy and the movement of people from 2022.

“Families have been able to go out more, go to services, enjoy them, and the job market is responding with a stronger recovery than expected”, he says.

For Étore Sanchez, chief economist at Ativa, the good performance of the sector helps to reduce unemployment by stimulating the hiring of personnel to meet a resumption of post-pandemic demand.

He also points out the more positive perspectives in relation to the growth of the Gross Domestic Product (GDP ) of 2022, which also strengthens the labor market by improving demand expectations.

In this scenario, the service sector has been the one with the highest balance of jobs created, highlights Rafael Pacheco, economist at Guide Investimentos.

He points out, however, that the labor market tends to respond with a lag to the drop in demand due to high interest rates, which can still lead to a more negative performance of employment in the second half of the year.

Ricardo Jacomassi, chief economist at TCP Partners, considers that the growth in services “is very positive for employment”. “We have an expectation of falling unemployment in the coming months, which also impacts on income improvement.”

Pacheco recalls that the service sector has been surprising the market, with acceleration month after month. He associates the positive performance with a pent-up demand, which in his view has been “underestimated” by the market.

“Families stopped consuming various categories of services, such as restaurants, hotels and tourist activities during the pandemic, and resumed demand when we saw the total reopening now in 2022”, he explains.

The duration of the effect of this movement has been longer than expected, even with some signs of loss of strength in recent months, according to the economist.

Another segment that has benefited is transport, in this case with a favorable cycle of commodities which increased the demand for freight transport services.

There is also a “change in the consumer profile, consuming more electronic services, with more demand for transport than in physical commerce”.

Sanchez considers that there is no way to know exactly what represents a new normal in service consumption patterns and what is a remnant of the post-pandemic recovery, however services “are making natural progress in this process of normalization of the economy”.

next months

Tobler, from Ibre, still sees room for the sector to grow more in the coming months, supported mainly by the segment of services provided to families, which remains at a lower level than pre-pandemic.

“There is a pent-up demand for travel, bars. The big point is that inflation needs to be better controlled for purchasing power to grow more and the recovery to be faster. Some of this consumption is not essential, hence the importance of controlling inflation,” he says.

According to him, the sector has had greater resilience than expected, but the second quarter was helped by government stimulus measures such as the anticipation of the 13th salary and the release of FGTS withdrawals.

He believes that this could happen again, with an increase of R$ 200 in the Brazil aid and other benefits announced by the government, which would help the sector. However, “there are factors of uncertainty such as inflation and high interest rates and caution among investors”.

Ativa’s Sanchez says the trend is for a second half to be worse than the first as purchasing power restrictions increase due to a combination of high interest rates and high inflation, as well as high levels of indebtedness and default.

He sees a decline in the activity as “inevitable”, but considers that Auxílio Brasil can make the performance less negative.

“This resource that is being injected is more linked to subsistence consumption than services, it is energy, housing, food, these are goods that will not boost or alleviate services themselves”, he ponders.

The June results themselves already indicate a slowdown in the categories compared to the same month in 2021, says Rafael Pacheco, which was already expected by the market.

The expectation is that this “continues in the second half of the year due to the effect of the Selic at the current level and the lag in monetary policy, which is beginning to have an effect”.

“Looking ahead, Auxílio Brasil and other government measures tend to support this demand a little, but on the other hand we have high interest rates that should slow down demand, with low-income families still having some support”, he says.