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Mexico's Jobless Rate Falls to Lowest Since 2008 in Retail Boost

Monday, 27 Apr 2015 03:24 PM

Joblessness in Mexico last month fell to the lowest in more than six years, bolstering prospects for further gains in domestic consumption following a slowdown in 2014.

The unemployment rate dropped to 4.2 percent in March after adjusting for seasonal variations, the national statistics institute said today. That was the lowest since October 2008, according to data compiled by Bloomberg.

Job gains are contributing to a revival in retail sales after tax increases last year caused spending growth to plunge to half its 2013 pace. Declining unemployment is not yet pressuring the inflation rate, which fell to the lowest in more than eight years in February and remains near the central bank's 3 percent target, according to Bank of America Corp.

"The labor market continues to improve and that means consumption is going to keep doing well," Carlos Capistran, chief Mexico economist at Bank of America, said. "The next question is, ‘Is this important for monetary policy?' It's still not giving you any labor pressures. There's less slack but it's fair to say there's still slack."

The central bank, led by Governor Agustin Carstens, cut its benchmark interest rate to a record-low 3 percent in June to boost economic growth that has missed analyst estimates in eight of the last 11 quarters.

Policy makers will probably keep borrowing costs unchanged until at least the third quarter of this year, when they will raise them for the first time since 2008 as the Federal Reserve tightens, according to the median forecast of economists surveyed by Bloomberg.

While lower unemployment is a positive development, part of the decline was due to people dropping out of the labor force, a sign of lingering economic weakness, according to Bill Adams, an economist at PNC Financial Services Group. The labor force fell to less than 60 percent of people 15 and over in March from slightly more than that level a year earlier.

"A labor force participation rate under 60 percent in Mexico indicates labor market slack," Adams said in a note to clients. "While good news, March's lower unemployment rate overstates the labor market's strength."

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Joblessness in Mexico last month fell to the lowest in more than six years, bolstering prospects for further gains in domestic consumption following a slowdown in 2014
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2015-24-27
Monday, 27 Apr 2015 03:24 PM
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