Last Good Friday a small ‘economic miracle’ occurred in the world’s largest economy and one that can undoubtedly bring relief to Mexico.
Due to the holiday season, it went unnoticed, but last Friday one of the biggest economic surprises in recent months was known, with potential benefits for Mexico. And it is inevitably linked to the evolution of the economy of its main partner and the first economy on the planet. Let’s get to the facts first.
Unexpected rebound in US labor market
Economists and analysts who follow the day-to-day running of the US economy projected that in March, the world’s largest power would generate 675,000 new jobs, a figure that was already significant from the start and would pay for the expected rebound for this year.
But the surprise was unmatched. The United States Department of Labor reported that 916 thousand new jobs were created in the third month of the year, 35.7 percent more than expected; something like 241 thousand additional jobs to what the consensus of analysts expected. All expectations were exceeded for the good of the United States economy … and very possibly of Mexico.
The figure is the highest in seven months, since August 2020 when 1.4 million new sources of employment were created. However, there is a clear difference between then and now.
In August 2020, the number of job creation was linked to the reopening of the economy, after the confinement in the United States and in practically the entire planet due to the pandemic generated by Covid-19. This reopening recovered a percentage of the 20 million jobs that were destroyed in that country.
In contrast, today the generation of almost 1 million jobs is due to the economic reactivation sustained by the start of immunization in that country and throughout the world, plus the arrival of the economic stimulus package for 1.95 billion dollars, factors that, since From the analysts’ point of view, it has triggered a kind of hiring “fever” that largely explains the historical figure that was generated in the third month of the current year.
The news, as positive as it was, does not ignore the fact that around 8 million jobs that were lost in the pandemic have yet to be recovered. And of course, there is still a long way to go before full employment is reached as it did in October 2018, reaching an unemployment rate of 3.7 percent, its lowest level at that time since 1969, today this indicator is close to 6 percent.
The benefits for Mexico
At the end of last month in the publication of the Update of the General Pre-Criteria of Economic Policy 2021 (PGPE), the Ministry of Finance and Public Credit (SHCP) modified upwards its GDP forecast for this year, from 4.6 to 5.3 percent.
He did not say so, at least explicitly, but without a doubt, the country’s tax authority bases its optimism on the economic rebound of our northern neighbor and main trading partner. It makes a lot of sense, but also a negative part that we will point out at the end.
It is very clear if economic growth is detonated in that country, as expected, Mexico will benefit, unless something happens that completely changes the scenario, hopefully not. Mexico will have to supply a large quantity of goods that US consumers will demand. If that happens, the reactivation in our country would receive an additional “push”. Therefore, the official optimism regarding growth, without forgetting that in any case, if the SHCP forecast comes true, our country would not have recovered this year the total blow it received in 2020 when GDP collapsed 8.5 percent.
The issue of remittances deserves a separate mention; Last year 41 billion dollars were received, a figure that was decisive so that in many regions of the country the economic disaster generated by the pandemic was not affected in all its magnitude. If by this 2021 we receive a similar amount, it will be great support again in those regions, but with the American labor machinery in full swing, it is possible that our countrymen who live in that country will recover much of the work they lost, more potential resources for Mexico, more remittances, more financial support for millions of families that would otherwise be in poverty or extreme poverty.
Good news, and another that was already known
The rebound in job creation and the economy in the United States is beneficial for our country, especially at this time when if there is something urgent for Mexico, it is to get out of a recession that is present even before the pandemic hit the world. and devastate the global economy.
But, everything indicates that history repeats itself, a history that we have already seen in other times. Mexico depends on the United States for solid growth, and it needs the billions of dollars that Mexican migrants send from that country. If those resources did not exist, it goes without saying the conditions in which many parts of Mexico would be in economic terms. This great dependence has taken our country out of great economic impasses in other times, clearly, there are two references: the 1995 crisis (known as the tequila crisis), and of course the subprime crisis (known as the mortgage crisis, 2008-2009 ). After decades, everything indicates once again that Mexico is incapable of growing by itself.
The situation could be complicated if Mexico continues to take measures that threaten economic synchrony in both countries. Before the pandemic, it was warned about this process, with the health and economic emergency the issue was put aside, but it is still pending in an economy that has signs of handling some issues with ideology rather than common sense.