The US begins to 'collect bill' from Mexico – El Financiero

The moderation of growth in USA which the recently published indicators point to has begun to collect its fee about the external sector of Mexico.

To begin with, the US labor market provided evidence that the demand for workers in that economy is moderating.

The non-agricultural payroll went from a generation of 315 thousand new jobs in March to 175 thousand in April of this year, the lowest job creation in six months, from 165 thousand in October 2023.

In addition, the figures for this indicator corresponding to the previous two months were revised downwards by 22 thousand, according to data from the US Bureau of Labor Statistics published this Friday.

Meanwhile, the unemployment rate unexpectedly increased by one tenth to 3.9 percent, above the 3.8 percent estimate, which, according to Bloomberg, suggests that some cooling is occurring in the labor market after a strong start to the year.

The participation rate remained at 62.7 percent. A higher participation rate helps slow wage growth.

In April, hourly wages increased 0.2 percent monthly and 3.9 percent annually, slowing for the third consecutive month and being the most moderate advance since June 2021.

Based on the employment report, financial market operators they shifted their bets for the first rate cut of interest on the part from the Federal Reserve from November to September of this year.

In the opinion of Bloomberg Economics, “the weaker-than-expected nonfarm employment figure in April, along with a higher unemployment rate, suggest that monetary policy (of the Fed) is finally taking hold in the labor market after “a long delay.”

The recalibration of rate expectationsbringing forward the start of the cuts process in time, caused a general decline in the dollar and Treasury bond yields, which allowed the Mexican peso to appreciate In the first operations on Friday it was around 16.83 per dollar, although it later rebounded to 17.03 pesos and closed the week at 16.96.

The signs of a possible deceleration economic in the US they were reflected in the behavior of income from remittances to Mexico.

This week the Bank of Mexico reported that in March Income from remittances from abroad stood at 5.21 million dollars, a figure that represented a decline of 3.3 percent compared to the same month of the previous year.

This is the first drop since April 2020at the beginning of the first wave of the pandemic in Mexico, ending 46 continuous months of sustained annual growth.

Added to the lower inflow of 'migradollar' flows is the fact that the value of remittances in pesos has decreased significantly due to the appreciation of the exchange rate.

Signs of cooling in the US too have begun to collect their quota on Mexican exports of goods to that economy.

Exports from Mexico to the United States registered a setback in the third month of the year, according to official data from the US Census Bureau.

In Marchshipments of Mexican products to the neighboring country to the north totaled 41,563 million dollars, a figure that represents a contraction of 2.9 percent annually, the first drop in 11 months.

Even so, Mexico remains the main supplier of merchandise to the US market and also as the US's first trading partner, above Canada and China.

In the USfor now, Labor indicators point to a gradual slowdown process of its economy, but it will be during the coming months when the weakness will worsen.

The effect in Mexico will be reflected in a smaller flow of remittanceswhich will weaken the consumption of the receiving families, as well as in a loss of export dynamism of goods to the US marketwhich will be inhibited by the cooling of economic activity in the US.