Latin America’s biggest economies see unemployment tick down

Unemployment rates in Brazil and Mexico fell in October, as strong labour markets underpin the outperformance of Latin America’s largest economies in the face of high interest rates.'

Official data released Thursday showed Brazil’s unemployment rate declined to 7.6 percent from a month earlier, with the number of out-of-work people falling to 8.3 million — both figures the lowest since 2015. In Mexico, the jobless rate dropped to 2.75 percent in the same period.

Robust job markets are helping to propel growth well above estimates from the start of the year. In Brazil, bumper harvests led to gains and have helped drive the unemployment rate lower for seven straight months. Meanwhile, the region’s second-largest economy has benefited from a flood of foreign capital for investments serving North American markets and also strong domestic demand.

In Brazil, the total number of employed people breached 100 million for the first time on record. Still, some 20 million workers remain underutilised, according to the national statistics agency.

Mexico’s number of employed people hit 59.4 million, representing a rise of one million from the same month a year prior, according to the government report.

Formal employment rose 0.1 percent on the month in seasonally-adjusted terms and a “solid” 3.2 percent year-on-year, according to Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc. “A tight labour market is one of the factors supporting a conservative calibration of monetary policy,” he wrote in a report.

Outshine

More disposable income and rising wages have buttressed consumer confidence in both nations. In turn, improved sentiment has driven stronger demand of goods and services, allowing Mexico and Brazil to outshine other important regional economies including Chile, Colombia and Argentina.

Mexico’s Central Bank, known as Banxico, on Wednesday raised its 2023 and 2024 economic growth forecasts to 3.3 percent and 3 percent, respectively. The economy is benefiting from “a resilient external demand and domestic spending dynamism,” Banxico Governor Victoria Rodriguez Ceja told reporters.

She added that lowering the interest rate from the current level of 11.25 percent in early 2024 was a possibility to be discussed with other board members.

Last week, Felipe Garcia Ascencio, chief executive officer of Banco Santander SA’s Mexico unit, said in an interview that greater investments in the local economy mean domestic employment is going to remain healthy.

Brazilian policy-makers led by Roberto Campos Neto see the domestic job market as “rather dynamic” with a high level of hiring, according to the minutes of their November monetary policy meeting. At the same time, they have reiterated that the economy will slow during coming quarters.

Brazil has room to continue lowering borrowing costs from the current level of 12.25 percent, Campos Neto said in an interview last week. Policymakers have already delivered three straight half-point reductions.