Strong labor market in Mexico another reason for Banxico to remain on hold

Mexico's unemployment rate rose to 4.37% sa in October, from 4.26% sa previously. The surprise was driven by an increase in seasonally adjusted terms of the participation rate by almost 63bp from last month. In annual terms, the unemployment rate has fallen 22bp, to 4.55% from 4.78% in October 2014.

The report suggests that the labor market might be improving; however, the new entrants in the labor market are maintaining a persistent level of slack, which will likely continue in the coming months. In that sense, wages are expected to remain growing at a modest pace, close to 4.2% y/y in nominal terms.

"The report is another element supporting our call that Banxico will remain on hold at the December 17 meeting, even if the Fed hikes. Since financial markets have remain relative stable, it is hard to believe that Banxico will hike under a low inflation environment and stalled unemployment, and more importantly, when it seems that the economy is finally gaining steam", says Barclays.