MexECON Blog

August Unemployment Falls Despite Risk of Recession

Mexico's August unemployment rate fell to a seasonally-adjusted 4.8%, down from 4.9% in July and a revised 5.0% in both June and May.  The unemployment rate in August was the lowest since February, and it was well below its six-month average of 5.0%.  The report was released today by INEGI, the official statistics agency.

Comment:  Recent indicators suggest Mexico is still sliding in the direction of a recession.  Exports are being held back by muted economic growth in the United States, while domestic demand is declining in the face of tight fiscal policy and recent shifts in housing policy.  In addition to weak hiring earlier in the year, many consumers have been buffeted by surging food prices and falling remittances from family members working north of the border.  As a result, falling consumer spending was the main reason for Mexico's negative economic growth in the second quarter.  All it would take now is another quarter of negative growth in July through September for Mexico to meet the customary definition of a recession.  Nevertheless, the small improvement in unemployment over the last few months and nascent signs that the government is starting to loosen fiscal policy again should offer some encouragement.  They serve as a reminder that a recession is still not quite set in stone, and even if it occurs, there is a good chance that it will be relatively short and shallow.

Patrick Fearon, CFA
Vice President, Fund Management

                                        Mexico's Unemployment Rate
                                          Seasonally Adjusted, Percent
                                                  Source:  INEGI
Unemployment 1308

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