The Day at a Glance | January 7 2022

The Top

*Employment data in the U.S. disappoints (199k vs 400ke.).

*Inflation in Mexico stabilizes during December and set below estimates (7.36% vs 7.51%e.).

*Inflation in Europe continued to accelerate during December (5% annual) – against expectations of moderation (4.7%e.).

*Mexico logged more than 25 thousand COVID-19 cases yesterday, and the wave of infections in the country is quickly growing this week.

Economic environment

Recovery in the U.S. labor market is still slow. Employment data in the United States once again disappointed in December and continues to point towards a moderate recovery in the labor market at the end of 2021. The economy generated 199 thousand new jobs in December against an expected 400 thousand. The participation rate remained unchanged (61.9%) and the unemployment rate decreased to 3.9%. October`s figures were revised upwards considerably (+102 thousand to 648 thousand), along with November`s (+39 thousand to 249 thousand). With this, the number of created jobs averaged 537 thousand per month, a fast pace of recovery that showed considerable signs of moderation towards the end of the year. Average hourly wages increased 4.7% annual, exceeding estimates (4.2%), although still setting below inflation. All in all, even though the data was disappointing, it`s unlikely that the FED will change its plans as time moves forward since the rate of unemployment is still on its way to reach full employment levels towards April, and it`s possible that December`s employment figures could be revised upwards just like in previous months. Nevertheless, the data continues to show resistance on behalf of workers to return to the labor market, something that is likely linked to the effects of the pandemic.

Inflation in Mexico stabilizes. The most recent consumer inflation data logged a 0.36% monthly rise in prices (vs 0.51%e.), which led the annual rate to stabilize at 7.36% (vs 7.37% Nov.). The largest increase came from the non-underlying component, specifically energy prices, which receded (-) 2.3% during the month due to LP gas (-12.31%). Agricultural goods also receded (-0.08%; fruits and vegetables -2.36%), contributing to the moderate increase in December`s rate of inflation. However, the underlying component exceeded estimates (0.8% monthly, vs 0.76%, with commodities increasing 0.91% and services 0.68%, both logging their highest figures during the year. Regarding services, airfares (22.24% monthly), restaurants (1% monthly) and tourist services (13.97%) led the increase and reflect seasonal factors along with a recovery in demand, which boosted the sector`s prices. With this, underlying inflation increased to 5.94% and set at its highest levels since September of 2001. Despite general inflation showing signs of stabilizing, it`ll be important for underlying inflation to gradually slow down and halt its increasing trend; its continued rise could point towards second order effects in the formation of prices.