Mexico's unemployment rate had an important decline reaching 4.23% sa in September from 4.32% sa previously; this drop is mainly explained by the reduction in seasonally adjusted terms of the participation rate by almost 60bp from the last month, implying that the labor market is improving but in a gradual manner as there is a slack in the economy. Also, the labor informality had a slight drop of 26bp in seasonally adjusted terms, while the underemployment rate stayed quite flat in 8.54% sa from 8.5% sa previously. In non-seasonally adjusted terms the unemployment rate printed 4.50%.
The report was almost in line with the forecast and supports the view that the labor market will keep getting better and unemployment rate should reach close to 4.0% by the end of the year, but there are some downside risks as manufacturing could decelerate due to lower global growth.
"Real wages keep rising under lower inflation, and the unemployment rate keeps heading south, giving space to Banxico to wait and see the development of the economic conditions to raise rates until it is strictly necessary, which support our view that these would not happen until June 2016, as we have forecasted before",says Barclays.
