SAO PAULO/BRASILIA, Aug 23 (Reuters): Many of Brazil's biggest retailers, homebuilders and carmakers are cutting jobs as Latin America's largest economy teeters on the edge of recession, a fresh blow to President Dilma Rousseff's re-election bid.
For years, low unemployment was key to Brazil's emergence as an economic power and important gains in the fight against poverty.
The unemployment rate remains near record lows of around 5 per cent and the leftist Rousseff regularly touts it as a success of the ruling Workers' Party over the last 12 years.
But after a decade of good news, the labor market is showing signs of weakness, possibly depriving her of a trump card in the October election.
Industries from textiles to steel have been trimming payrolls since last year due to weak economic growth, cost inflation, high taxes and a tough exchange rate.
Now jobs are disappearing in retail, construction and food processing, which had been reliable engines for growth and new employment over the last decade.
Even automakers, one of the big beneficiaries of Brazil's economic boom last decade, have cut thousands of jobs as they idle assembly lines in the face of slumping consumer demand.
The economic slowdown has deepened since the World Cup soccer tournament that ended last month, threatening to undercut Rousseff's re-election campaign as retail workers like 27-year-old Evandro Dias lose their jobs.
"Sales were horrible ahead of the Cup, but everyone thought things would rebound. Instead they got even worse, so here I am," said Dias, who stopped by a Sao Paulo union on a recent afternoon to register his layoff from an electronics retailer.
The low jobless rate is due in part to a shrinking labor force as more young Brazilians pursue higher education and technical training. Many economists expect unemployment to rise as government figures show formal job creation slowing to its weakest pace in over a decade.
Brazil's economy added less than 12,000 net payroll jobs in July, the slowest pace for the month in 15 years, according to official data released on Thursday. Most new jobs were low-skill service and agricultural hirings.
Big companies have been careful to avoid mass layoffs, cutting a few hundred workers at a time or leaving empty posts unfilled, but the cumulative effect is seeping into the election campaign.
"We're not generating good-quality jobs here - or even low-quality ones, according to the latest data," Senator Aecio Neves, a pro-business former state governor and one of Rousseff's top rivals, said in a recent TV interview.
Ahead of the Oct. 5 election, Rousseff is selling the message of economic good times and greater opportunities under Workers' Party rule. It is a key reason behind her lead in opinion polls even though growth has slowed to less than 2 per cent per year during her own four-year term and inflation is running at around 6.5 per cent.
Neves and environmentalist Marina Silva, who announced her presidential candidacy this week, are focusing on the sluggish economy in their campaigns and are almost certain to force Rousseff into a runoff vote on Oct. 26.
A recent poll showed that unemployment is already the third biggest concern of voters, after healthcare and crime.
Rousseff has a strong lead in polls for the first round but looks vulnerable in a likely runoff vote, especially if she faces Silva.
