The Day at a Glance | December 2 2022

*Employment and wages surprised to the upside in the United States.

*Minimum wage in Mexico will increase 20% in 2023; this is 6 consecutive years of double-digit increases.

*The manufacturing ISM in the United States receded in November for the first time since May of 2020.

*Inflation for producers in Europe decreased to 30.8% annual in October.

*Central Bank of China will focus on economic growth, leaving the door open for potential stimulus.

*Climate change, geopolitical and demographic transitions could maintain prices high for a longer period of time: BIS.

*Biden and Macron promise unity in Ukraine and seek to end tensions due to subsidies in US industries.

*Russia is “open” to negotiating with the West, but only if it accepts Moscow`s demands.

Economic environment

Wages increase. Employment figures in the United States once again surprised to the upside as 236 thousand new jobs were created; more than the estimated 200 thousand. With this, the unemployment rate remained at 3.7%; meanwhile, the participation rate decreased to 62.1%. The data confirms that a strong slowdown in job creation still hasn’t materialized as expected by markets, and the surprise in employment was accompanied by a much larger increase in wages. The average hourly wage increased 0.6% during the month – way above the estimated 0.3% – and once again accelerated at a 5.1% annual pace. This is bad news as it points out wage pressures may be building up, with risks that these may maintain inflationary pressures as time moves forward. Persistent wage increases could imply that the FED may not have enough room to pause the increasing rates cycle in its fight against inflation. The decrease in the participation rate also contributes towards a tighter labor market, which could maintain wage pressures. Markets expect a strong slowdown in the labor market in the following months, which would allow the FED to stop the increasing rates cycle. However, the data has not shown weakness in employment up to now, and the risk of a more structural inflationary trend remains in place.