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Labor market lost half a million jobs in May; field, the most affected

The working market paused job creation in May with the departure of half a million people of the employed population. This contraction occurs after a growth of one million jobs was reported in the previous month, interrupting three months of positive balances.

According to the National Survey of Occupation and Employment (ENOE), with the drop of 518,079 jobs observed in the fifth month of the year, the vacancy rate reversed its downward trend to position itself at 3.3%, an increase of 0.3 percentage points compared to what was observed in April. The drop in occupancy levels in May leaves as accumulated 202,000 jobs created so far in 2022.

59% of the contraction reported by the National Institute of Statistics and Geography (Inegi) is explained by the reduction in employment in construction activities. agriculture, fishing and livestock. The rest of the loss is concentrated in the service industrywhere the subsectors of restaurants, various services and governments reported an accumulated reduction of 562,263 jobs and that eclipsed the gains in the rest of the activities such as commerce, transportation, professional and social services.

As for the position of occupation, subordinate work took a nosedive of just over a million jobs. While this type of occupation, self-employment and unpaid work gained ground with growth of 339,460 and 259,353 jobs, respectively, in their levels of employed population.

Juan Carlos Alderete, Executive Director of Economic Analysis and Financial Market Strategy at Banorte, explained that the labor market behavior in May it was contrary to what was expected as no seasonality factors were observed in the month.

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“The result on jobs is negative, considering that the usual seasonality points to a moderate creation, considering the jobs that are usually lost during Holy Week. In this sense, the dynamic was completely the opposite this year, with a strong creation the previous month (+1.0 million) and a moderate loss in this period”, he pointed out.

In this sense, the specialist considered that there should be caution in determining whether the negative balance is a temporal distortion because of the pandemic or “if it really marks a deterioration in working conditions.”

Marcos Daniel Arias Novelo, economic analyst at Monex, agreed on this, stressing that “May does not usually have adverse seasonal pressures.” This could mean, he added, that the drop in occupancy levels it is a warning signal about the wind changes in the economy.

“The decrease in the employed population is indeed a sign of deterioration in the labor market. However, in May there was also an improvement in some labor indicators”, said Gabriela Siller, director of Economic and Financial Analysis of Banco Base.

Among the positive points, he added, the widespread unemployment rate it fell 0.2 percentage points to 13.9%, its lowest level since March 2020. “We see mixed signals because some indicators improve and others deteriorate. These mixed signals are evidence of the economic stagnation that we are living”, detailed the specialist.

Formality tops losses

52% of the reduction in the occupancy level reported in May was concentrated in formal jobs. In this way, the weakening of formality reported by the ENOE far exceeded the almost 2,900 positions eliminated in the records of the Mexican Institute of Social Security (IMSS) in the same period.

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“This points to a significant decline in other areas, such as federal and state workersas well as the army. As a result, the informality rate rose to 55.6%”, indicated Juan Carlos Alderete.

In that order of ideas, Marcos Daniel Arias pointed out that the little more than 315,000 places that were lost in government activitiesthe subsector that led the decline within the services sector, is the second largest loss since the start of the Covid-19 pandemic.

“It could warn of pressures to spending reduction prior to the month’s public finance report being published on Thursday afternoon,” warned the economic analyst.

Among the positive signs, the specialists highlighted the reduction of the underemployment rate, which fell 0.5 percentage point to 8.5 percent. Among the indicators that make up the labor gap (unemployment and available population), underemployment is the one that has had the greatest reduction, although it still has room to continue advancing.

In this way, the job gap —which measures the broader need for employment— is at its lowest level so far in the pandemic, falling to 21.2% of the potential labor force. This implies that the population affected by the pandemic at work decreased from 2.4 to 1.6 million people, highlighted Gabriela Siller.

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