MexECON Blog

December Unemployment Falls to 5.5 Percent

In a report today from INEGI, the official statistics agency, Mexico's December unemployment rate fell to a seasonally-adjusted 5.5%, down from 5.6% in November but still higher than the 5.4% registered in October.  In fact, Mexican joblessness is still at its second-highest level in the last year, and it is not far from its cycle peak of 6.0% in September 2009.  For comparison, Mexico's unemployment rate was consistently between 3.0% and 4.0% during the country's last economic boom from 2005 to 2008.

Comment:  Despite the small retreat in December, joblessness in Mexico has been on a worrying rebound since last autumn.  The main risk is that rising unemployment will short-circuit the recent rebound in consumer spending.  That, in turn, could leave the country's economic rebound once again overly dependent on exports.  It is unclear what has been driving the unemployment rate higher again, but some of it could simply reflect reduced hiring by firms expecting slower demand from the United States.  Now that U.S. tax cuts are being implemented, even as recent U.S. economic data has been surprisingly good, Mexican producers may need to rethink their hiring plans.  They could well start to hire more rapidly again in order to boost production.  If so, the recent rise in unemployment could be just another blip, and consumer spending in Mexico could continue to accelerate.

Patrick Fearon, CFA
Vice President, Fund Management

                             Mexico's Unemployment Rate
                              Seasonally adjusted, Percent
                                           Source:  INEGI
Unemployment 1012

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