Economics: Wage growth remains strong even as hiring slows along with economic activity so far in 2024

MEXICO - Report 10 Jun 2024 by Mauricio Gonzalez and Francisco González

Labor indicators for the first four months of the year point to employment remaining at high levels, with growth concentrated in formal employment. Yet we also continue to witness a deceleration from 2023 growth rates, in keeping with the behavior of the economy. Despite this slowing, which can primarily be traced to manufacturing, wages have maintained high growth rates in most sectors, leading the total wage bill to outpace GDP.

Employment trends have mirrored the economic performance of each sector. Primary sector jobs contracted in the first quarter of 2024 amid the drought engulfing the vast majority of agricultural production regions, while hiring in the secondary sector slowed in response to a stalled manufacturing sector and a construction sector whose pace of growth has run up against a high base of comparison from 2023.

Real-term growth in wages and the total wage bill registered in 2023 is considered one of the causes of the overwhelming victory of the incumbent party in the June 2 elections.

Regarding the electoral results and the financial markets, last week the Mexico Stock Exchange’s IPC blue chip index and the peso both lost ground over concerns that the next Congress, in which Morena may yet obtain a qualified majority in both chambers, could pass a series of controversial constitutional reforms in September, before President López Obrador leaves office. Several of these reforms are viewed askance by markets, such as the judicial system reform, under which judges are to be chosen at the ballot box and regarding passage of which President López Obrador said at the end of the previous week, "Justice comes before markets.” In response, the Mexican Stock Exchange fell 4.0%, while the Mexican currency softened from 17.45 to 18.41/USD between Friday, May 31 and Friday, June 7.

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