The Day at a Glance | July 2 2020

Employment in the US once again surprises to the upside

Employment figures greatly exceeded analysts` estimates for a second consecutive month as 4.8 million new jobs were recorded in June. Data suggests an acceleration in the creation of jobs, which is something that highly contrasts with initial jobless claims, which last week were still above 1.4 million. The rate of unemployment decreased to 11.1%, even though the Department of Labor assured that it still faces issues with classification, which if corrected, could increase the rate in 1%. Salaries, for their part, kept decelerating to 5% with the return of low-paid position workers. At the moment, news is very positive regarding a recovery, even though it’s important to clarify that the survey carried out in the first half of June did not include new business closures due to the virus`s upsurge in the Southern part of the country in recent weeks, which is something that makes it more of a lagging indicator. The majority of these jobs are employees going back to work – that had previously been temporarily suspended because of the virus (4.8M), while permanent jobs lost grew in 588 thousand to 2.9M in June, according to the report. The majority of jobs were recovered in the leisure and hospitality (2.1M), and food and beverage service (1.5M) industries. The report raises more questions than it answers because it is inconsistent with other measurements of the labor market and the volatility in monthly data; a sustained recovery in employment in the mid-term is still in doubt. Compared to February, 14.6M jobs have not been recovered.

Remittances inflows grow in Mexico

According to figures published by Mexico`s Central Bank yesterday, remittances inflows in Mexico have not decelerated and recorded a monthly 18.1% increase in May. At an annual rate, the rate of growth reached 2.9% and the total has reached 15,537 million dollars in the first five months of the year. At the moment, figures contravene economists` expectations as most of them expect to see a deceleration regarding inflows because of the contraction in economic activity and high unemployment in the US. In the last 12 months, inflows total 37,512 million dollars – a record figure. This is good news for consumption and its recovery given the fact that around an estimated 1.65 million homes receive this income. One of the possible explanations of the performance of remittances has to do with the fact that one third of Mexican migrants who send remittances are US citizens, which has made them eligible to receive unemployment security from the government, according to Jesús Cervantes, from the Center for Latin American Monetary Studies (cited in The Economist). According to Cervantes, the phenomenon could cause the annual drop in remittance flows to be less than estimated up to today. Other positive data published yesterday includes leading IMEF indicators, which show a rebound in manufacturing (42) as well as non-manufacturing (42.5) activities in the country in June. Both keep showing a contraction but suggest that the worst or the Mexican economy has already passed. The resumption of non-essential activities during the month along with the US reopening made an important contribution to the resurgence in activity, even though the country is far from showing a growth trend. The IMEF considers that a contraction of the economy close to an annual 10% is highly likely.

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