MexECON Blog

July Unemployment Falls to 4.9 Percent

Mexico's July unemployment rate fell to a seasonally-adjusted 4.9%, down from revised figures of 5.0% in June and May and 5.1% in April.  Unemployment is now at its lowest level since February, and it is slightly below its six-month average of 5.0%.  The report was released today by INEGI, the official statistics agency.

Comment:  The pullback in Mexican joblessness is consistent with other recent indicators that suggest the country's economic slowdown has been arrested and may even be turning around slightly.  In July, for example, manufacturing accelerated marginally, and consumer confidence rose.  A report yesterday showed retail sales increased in June for a second straight month.  Nevertheless, the Mexican economy is still facing headwinds, and I am skeptical that an appreciable improvement is in the cards in the near term.  The biggest problem is that U.S. demand is still growing only slowly.  Even if it strengthens toward the end of the year as many observers expect, I doubt that it can strengthen enough to produce a renewed boom in Mexican exports and industrial production.  Another problem is that Mexico's government has tightened spending and shifted housing support policies, putting a damper on construction.  Even if those initiatives are partially reversed, it would take some time before building strengthens again.  Mexican consumers do appear to be encouraged by the fact that the economy is not slowing further and that hiring has stabilized or improved.  They have also been helped by cooling inflation.  However, they are likely to remain cautious until unemployment falls more significantly, and those who rely on support from family members working in the United States are still struggling with an ongoing slide in remittances.  Therefore, I believe the Mexican economy will continue to grow at a below-average rate for a while yet.

Patrick Fearon, CFA
Vice President, Fund Management

                                         Mexico's Unemployment Rate
                                           Seasonally Adjusted, Percent
                                                     Source:  INEGI
Unemployment 1307

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