Contraction pushes unemployment up to 7,9% in the first quarter.

By Rodrigo Viga Gaier and Camila Moreira

RIO DE JANEIRO/SÃO PAULO (Reuters) The unemployment rate rose to 7,9 percent in the first quarter of this year compared to the previous three months, the highest level in two years, with a sharp increase in the demand for jobs, in yet another sign of the difficulties faced by the economy even though real income has risen.

The reading indicated by the Continuous National Household Sample Survey (PNAD) released this Thursday by the Brazilian Institute of Geography and Statistics (IBGE) showed an increase compared to the rate of 6,5 percent in the fourth quarter.

It was also higher than the result for the first quarter of 2014, when the unemployment rate in the country reached 7,2 percent, and is the highest since the first quarter of 2013, when it reached 8,0 percent.

Data from the Continuous National Household Sample Survey (PNAD Contínua) for the period from January to March of this year shows a recurrence of the scenario of increased demand for work and job cuts, which has been the hallmark of the labor market since the beginning of the year.

According to the survey, in the first quarter the employment rate in the country, which measures the proportion of the population employed in relation to the working-age population, was 56,2 percent, compared to 56,9 percent in the fourth quarter of 2014 and 56,8 percent in the first three months of last year.

Between January and March, the number of unemployed, which includes those who took some action to find work, reached 7,934 million people, a 23 percent increase compared to the fourth quarter.

The employed population reached 92,023 million people, a decrease of 0,9 percent compared to the previous period.

On the other hand, IBGE reported that workers' real income rose 0,8 percent compared to the previous quarter, to 1.840 reais, but remained stable compared to the first quarter of last year.

The Continuous National Household Sample Survey (PNAD Contínua) has national coverage and its objective is to replace the Monthly Employment Survey (PME), which only considers data collected in six metropolitan regions of the country. According to the PME, in March unemployment rose for the third consecutive month, reaching 6,2 percent. [nL1N0XP19J]

The labor market has been succumbing to the fragility of the economy, which is expected to contract this year, high inflation, and high interest rates.

(Edited by Roberto Samora)