The Day at a Glance | December 8 2023

*The U.S. employment report indicates the creation of 199,000 jobs, higher than estimated, with the unemployment rate dropping to 3.7%.

*Fitch Ratings reaffirms Mexico’s sovereign debt rating at BBB- due to prudent fiscal posture and strength in external accounts.

*U.S. Treasury Secretary Janet Yellen visits Mexico to discuss measures regarding fentanyl trafficking. She will meet with López Obrador today.

Economic environment

The employment report exceeded expectations by creating 199,000 jobs in November, while the unemployment rate dropped to 3.7%. Hourly wages increased by 0.2%, the same as the previous month. The sectors with the largest gains were healthcare and government, while the industrial sector recovered ground after the strike in October. Job creation in the retail sector declined. The employment report does not show signs of cooling down, as 150 jobs were created in October and a significant rebound was observed in November. However, the trend over the past few months remains slightly lower, since job creation in the first half of the year exceeded 256,000 jobs per month. This report raises questions about the possibility of the Federal Reserve beginning to cut rates as soon as March of next year, as the strength of the labor market could mean that the disinflation process is slower than estimated.

Fitch Ratings maintained Mexico’s sovereign debt rating at BBB- with a stable outlook. The affirmation is based on Mexico’s prudent fiscal stance, solid external accounts, and a debt-to-GDP ratio below 50% and lower than its Latin American peers. The positive impact of nearshoring is again highlighted. They noted that the disinflation path is sufficient and considered that Banxico has room to start cutting the reference rate in Q1 2024. However, on the downside, they point out concerns about medium and long-term growth and the fiscal burden of Pemex. In a statement similar to the previous one, none of the rating agencies explicitly points out a problem regarding the sovereign’s repayment capacity, so a change in the rating is not expected in the next 18 months.