Economics: Employment in selected sectors remained weak at year-end 2022
Some of the latest labor market indicators have given officials much to crow about. Formal sector jobs and pay continued to accelerate last year, with further improvements reported for January. But not all the numbers paint such a rosy picture.
As informal employment soared amid the 2021 rebound, average wage income stagnated and fell further in real terms through the first three quarters of 2022. The rebound in the total wage bill began to level off in 2Q22, followed by a slight real-term drop in 3Q22, and we expect 4Q numbers to show that it stalled year on year. Despite a significant recovery in the number of people on company payrolls, as of November 2022 such employment was still running 2.4% below November 2018 levels (5% lower in construction or retail commerce), with only manufacturing jobs clearing that bar. Also, some of the growth in earned income and formal sector employment has been a by-product of the mid-2021 outsourcing rules that pressured companies to abandon the widespread practice of either keeping at least some of their workforce fully outsourced or under-reporting their workers’ wages so as to lower their labor expenses and tax bills, including their social security payroll tax expenses.
This week we draw on major household and business sector surveys of representative companies from each sector in order to better analyze the behavior of employment and pay. Those surveys have tended to portray an uneven recovery in the wake of the pandemic, and signs suggest there could be a slowdown both in employment and in total remuneration paid by companies, with all the negative consequences that implies for private consumption in the second half of 2023.
In economic news last week, the industrial sector continued to cruise during December, construction activity accelerated a very weak and incipient recovery, and fixed capital formation sustained its uptrend in November. And after consumer inflation accelerated more than expected in January, Banco de México responded with a half-point rate hike, 0.25 points higher than the markets expected.
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