MexECON Blog

July Unemployment Falls to 5.3 Percent

In a report released last week by INEGI, the official statistics agency, Mexico's July unemployment rate retreated to a seasonally-adjusted 5.3%.  In June, joblessness in Mexico had surged to a revised 5.8%, almost reaching the cycle high of 6.0% back in September 2009.  With the pullback in July, the unemployment rate is back down to its lowest level since April.

Comment:  Some of the rise in Mexican unemployment in late spring and early summer probably reflected supply chain disruptions in the auto sector after the March earthquake in Japan.  The fall in unemployment in July could mean those disruptions have dissipated and auto workers are going back to their jobs.  With the recent slowdown in global economic growth and Mexico's softening trade activity, however, it will take a few more months of data to know whether joblessness will stay down.  One good sign going forward is that recent reports show domestic demand in Mexico is holding up better than anticipated, though there has been some slowing.  Moreover, a report last week showed the economy grew a healthy 1.1% in the second quarter, suggesting it has considerable momentum that could help it weather a further weakening in foreign demand.  Nevertheless, economic headwinds are gathering, hiring could soften again in the near future, and consumers could well retrench going forward.

Patrick Fearon, CFA
Vice President, Fund Management

                              Mexico's Unemployment Rate
                              Seasonally Adjusted, Percent
                                          Source:  INEGI
Unemployment 1107

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