MexECON Blog

December Unemployment Falls Sharply

Mexico's December unemployment rate plunged to a seasonally-adjusted 4.4%, compared with revised readings of 4.6% in November and 4.7% in both October and September.  As recently as July, joblessness in Mexico stood at 5.1%.  Illustrating how sharp the recent downtrend has been, the unemployment rate in December was well below its six-month average of 4.7%.  In fact, the December reading was the lowest since late 2008.

The report was released today by INEGI, the official statistics agency.

Comment:  After surging in the aftermath of the 2008-2009 recession, unemployment in Mexico had been falling only gradually.  Since last summer, however, joblessness has fallen much more rapidly.  That suggests that the Mexican economy is finally starting to derive more benefit from the ongoing growth in key sectors.  As the U.S. economy gathers strength, for example, Mexican exports have been rising at a decent pace.  That has prompted stronger manufacturing activity, and it has encouraged continued increases in corporate investment.  At the same time, homebuilding is in a sustained uptrend after a long period of extreme weakness.  New sales taxes imposed in early 2014 and the government's tight spending on public works continue to be a headwind, and falling oil prices and potential interest-rate hikes in the United States are both risks.  Nevertheless, it appears that the Mexican economy may have entered into a virtuous cycle in which greater production and increased hiring will underpin continued improvement in consumer sentiment and consumption spending, which in turn will help prompt even more production and hiring.  That should allow Mexican economic growth to accelerate moderately in the coming quarters. 

Patrick Fearon, CFA
Vice President, Fund Management

Unemployment 1412

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