Mexico: Gradual improvement in U.S labor market supports Mexico's remittances
August 3, 2015
Remittances from Mexican workers abroad registered USD 2.2 billion in June. The result was up the USD 2.0 billion observed in the same month last year, representing a 6.1% increase—faster than both the 2.0% expansion tallied in May and the 4.2% increase the markets had expected.
In the second quarter, remittances totaled USD 6.4 billion (Q1: USD 5.7 billion). Of that amount, USD 6.0 billion came from the U.S., according to a new breakdown elaborated by Mexico’s Central Bank. Far away came Canada, which sent USD 71 million, followed by Colombia, where transactions recorded USD 10 million. This information provides a clearer picture that most of the cash sent from Mexicans abroad comes from the northern neighbors.
Remittances transactions continued to be supported by the gradual improvement in the U.S. labor market, in particular in the construction sector. U.S payrolls in the construction sector, which is a proxy of hiring dynamics in the labor market with a high proportion of Mexican workers, continued to increase at a healthy rhythm. The accumulated remittances in the 12 months up to June recorded USD 24 billion, which represented a 5.8% increase compared to the same period a year ago. As there is more and more evidence that the U.S. labor market is improving, remittances are gradually approaching the peak that occurred in 2007, when they totaled USD 26.1 billion.
Remittances represent an important source of income for many Mexican families and with the recent weakening of the peso is supporting households’ purchasing power.
Author: Ricardo Aceves, Senior Economist