After peaking in July 2014, the unemployment rate in Mexico declined to 3.76% in December as labour force growth slowed in line with employment growth.
The rise in the unemployment rate in January (from 3.76% to 4.51% and 4.37% to 4.43% on a seasonally adjusted basis) appears consistent with low industrial production growth in the month. However, given the shape of the economy and the key driving factor - strong US growth - the pace of hiring is expected to strengthen further. As a result, the unemployment rate should decline to 4.11% in February (4.35% on seasonally adjusted basis).
"The economy appears set to grow above-trend in 2015 and beyond, which will help tighten the labour market further. This should keep the downside risk to inflation in check even though the economy's growth potential could continue to rise over the next few years", said Societe Generale in report on Friday.
