Mexican unemployment rate likely fell further on seasonally adjusted basis

After peaking in July 2014, the Mexican unemployment rate declined to 3.76% in December, as labour force growth slowed in line with employment growth, and it then fluctuated between 4.51% in January and 3.46% in March. The more stable seasonally adjusted rate has hovered between 4.24% and 4.41% over the past four months. Both these indicators have declined by nearly 1% in the past year and are nearly at levels last seen in 2008.

In April, while the unemployment rate is likely to rise to 4.10%, the seasonally adjusted rate (the preferred gauge) should moderate slightly to 4.17%, said Societe Generale in a report on Thursday. 

The reason that the unemployment rate continued to decline in Q1 despite near stagnation in growth was slightly puzzling but can probably be explained by low employment growth in H2 14 (when labour force growth also slowed) and strong productivity growth last year. The economy appears set to grow near trend in 2015 and above trend beyond. This will help tighten the labour market further. This should keep the downside risk to inflation in check even though the economy's growth potential could continue to rise over the next few years.