According to Bloomberg Mexico created the fewest formal jobs in 2019 since the financial crisis a decade ago after the nation raised the minimum wage and economic growth flat-lined.
The country lost 382,210 jobs in December, according to data released Sunday by the nation’s social security institute known as IMSS. That lowers the net number of jobs created in the year to about 342,000, which is nearly half the amount of new posts seen in 2018.
December is usually the month that reports the most jobs lost in Mexico, as employers fire workers to avoid paying a holiday bonus and then re-hire them in the new year.
President Andres Manuel Lopez Obrador took office a year ago promising to boost the well-being of workers in Latin America’s second-largest economy. While he increased the minimum wage 16% at the start of his administration, the Mexican central bank in August said that move had contributed to a slowdown in job creation.
Some Banco de Mexico board members are now worried that an additional 20% boost — seven times the rate of inflation — that went into effect this month could further damage the labor market in an economy struggling to rebound from recession.
“Weaker economic growth is having an impact on employment growth,” said Felipe Hernandez, a Latin America economist at Bloomberg Economics. Likewise, “employment growth has decelerated, and that seems to be hurting consumption, which is adding some headwinds to the economy.”
Lopez Obrador is using large minimum wage increases as part of a strategy to fight poverty and inequality. That’s a dramatic break from the governments of many of his predecessors, who held increases to the minimum salary at levels that barely topped inflation as a way to help exporters to the U.S. keep costs down.
Mexico’s central bank lowered its key interest rate in each of its past four meetings and by 1 percentage point in total in 2019. The rate of 7.25% is meant to boost the stagnant economy as inflation slowed to its 3% goal. But minutes from the December meeting show that some board members see a risk that the new wage increase will cause inflation to accelerate.