Suspicious Variables of Employment Weakness

The generation of employment in the first five months of 2019 shows a significant decrease compared to previous years.

The six-year cycle explains the slowdown in employment, however, the jobs created from January to May are just 3.6% higher than those for the same period in 2013, in an 18% larger economy.

INEGI also reports that the underemployment rate jumps from 6.4% in February to 7.8% in May.

The suspect variables of employment weakness are several:

1.- T-MEC. The uncertainty about its approval in the US Congress and its impact on investment and exports from Mexico to the US, particularly in the automotive industry, where the regional and labor content chapters are real puzzles.

2.- Moderate slowdown in Mexican exports, as a reflection of the weakening of investment and demand for goods in the US and globally.

3.- Increase in salaries, promoted since 2017 and accentuated this year within the framework of a new labor policy within the context of the renegotiation of NAFTA. The average salaries of IMSS affiliates increased 6.7% year-on-year in May. This implies a real growth of 2.3%.

4.- Low investment. Added to the uncertainty in the relationship with the US and the prospect of foreign demand are mistrust in Q4 policies and a restrictive monetary policy. INEGI's surveys on the opportune moment to invest show adverse results in commerce (34.8) and construction (27.4). Manufacturing (48.3) is slightly below the neutral level (50).

Many suspicious variables, which one is the culprit for you?