Mexico's labor market deterioration is temporary

In May, Mexico's industrial production posted its first negative yoy print in over a year and appears that growth has slowed significantly in H1.

As a result of the slowdown, the labor market showed some signs of stagnation in Q2 if not deterioration. Societe Generale forecasts, the unemployment rate likely rose in Q2 to 4.4% from 4.2% in Q1 although the seasonally adjusted series shows it likely remained unchanged at 4.4% in Q2.

The more stable seasonally-adjusted rate has hovered between 4.24% and 4.41% over the past few months. Q2 increase notwithstanding, both these indicators have declined between 0.5% and 1.0% over past 12 months and are nearly at levels last seen in 2008. Moreover, with the economy likely to accelerate again in H2 and beyond, therefore, the deterioration in labor market conditions is expected to be temporary, says Societe Generale.