Economics: Parsing Labor Market Data
According to the National Employment Survey (ENOE) for the last quarter of 2015, the total number of people employed grew 2.5% on average in 2015 with the most pronounced increase a 3.5% rise registered for the fourth quarter that marked an extension of a growth trend through the second half of the year. In contrast, the number of payroll jobs reported by the Mexican Social Security Institute (IMSS) increased by 4.3% on average and at a similar 4.0% pace during the fourth quarter.
Job creation is one of the aspects most frequently cited by officials as evidence of a positive economic performance under the current administration (since the end of 2012), and they especially emphasize that the almost two million payroll jobs reported for the past three years mark the strongest formal sector job growth ever recorded for the first half of any presidential administration.
A greater degree of formal sector employment is a positive development, but rather than an outright expansion of total employment this expansion of payroll jobs has been a result of the labor reform and changes to fiscal policy aimed at increasing formality.
Despite the trend of employers shifting their workers from informality onto formal payrolls, there has been no drop in the rate of informality because in late 2015 there was also a significant rise in the number of jobs in the shadow economy similar to the one seen in payroll employment.
One positive aspect of the latest ENOE results is a strong expansion of the total wage mass in late 2015, which at least partially explains the accelerated pace of growth in retail sales and internal consumption during that same period. In this week’s Weekly Outlook section, we offer an overview of the income levels and types of employment in which all those who are working are engaged.
In other news, last week the Ministry of Finance and Banco de México announced preventative measures aimed at avoiding a deterioration of conditions in response to the slowing of the global economy. The ministry indicated its intention to lower federal administration spending for the current year by 132.3 billion pesos, the equivalent of 0.7% of estimated GDP. Moreover, it said that it would call on the Pemex Board of Directors to implement a 100 billion peso reduction in spending for 2016. The federal electricity utility CFE will see its spending budget slashed by 2.50 billion pesos, and the remaining 29.3 billion pesos in cuts will be taken from the budgets of federal departments and agencies with 60% of those reductions coming out of current spending and 40% to be trimmed from investment expenditures.
This adjustment is conceived of as a mechanism for allowing the government to maintain its commitment to hold the fiscal deficit to no more than 3.5% of GDP and keep public finances solid overall without either raising taxes or taking on more debt.
For its part, the board of Banco de México decided to raise its target interbank lending rate by half a percentage point to 3.75%. The deterioration of the external environment confronting the Mexican economy, and the strength of the US dollar (which increases the probability of an impact on inflation expectations), were among the main reasons the monetary authority cited for its rate hike.
Moreover, the Exchange Commission, a body on which officials from the Ministry of Finance and Banco de México jointly serve, decided to suspend the mechanism of daily dollar auctions and replace it with more intervention mechanisms for directly selling dollars to financial institutions.
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