Volume 44, Number 173,
April-June 2013
From Recession to Recovery:
Production and Employment in Mexico and The State of Mexico
Pablo Mejía, Sandra Ochoa and Miguel Ángel Díaz
Effects on Production and Employment: Evidence by Sector ( ...continuation )

The comparison of the workers enrolled in the imss at the beginning of the recession (peak) and those at the last date used (December 2010) indicates that the jobs lost in all three categories were completely recovered in the services sector of Mexico and The State of Mexico. By contrast, permanent employment in the secondary sector (national and state) had not recovered by December 2010 (Figure 3a), which explains why total permanent employment was practically at the same level as pre-recession. Moreover, strong growth in temporary employment – which by the end was at levels nearing 15% above the pre-recession peak for both total and the secondary sector (panel b) – was only enough to compensate for the slow recovery of permanent industrial employment in the State of Mexico, where it can be observed that total employment in the secondary sector has satisfactorily recovered (0.4% above the previous peak). On the national level, however, total industrial employment still shows a deficit at the end of the data sample of about 3.8% with respect to the peak, as can be seen in Figure 3c.

Finally, comparing Figures 2 and 3a shows important differences in the performance of production and total employment both in Mexico and The State of Mexico. Especially of note were the longer duration and depth of the drop in tertiary and total production when compared with that of corresponding employment. By contrast, the variables behaved more similarly in the secondary sector. There was significant similarity between national and state employment, in contrast with the relative performance of production, which reflects greater heterogeneity on the sector and national-state levels.

WHAT EXPLAINS THE EFFECTS OF PRODUCTION AND EMPLOYMENT?

The evidence given in the above section demonstrates the magnitude of the effects of the current international cycle on production and employment in Mexico and The State of Mexico. This section will analyze the dynamics of the variables that may have acted as transmission mechanisms during the last two phases of the same cycle.

As argued in the section regarding classical economic cycles, commercial and capital flows have been the main channels by which international cycles over the past decades have been transmitted. In order to analyze their behavior in the current cycle, Table 4 shows the features of the phases of the classical cycle for different measures of commercial and capital flows,21 such as total exports for Mexico (X-Mex), us total imports (M-us), Revenue from Abroad (ra), fdi and remittances (Rem).22

The statistical information effectively shows that commerce, especially manufactures, may have acted as the most important mechanism to transmit us cycles to Mexico, as more than 80% of our exports end up in the us market and approximately 80% of these are manufactured goods. Besides its relative weight of gdp,23 the role of commerce in transmitting the cycles can also be seen in the fact that total Mexican exports closely follow the behavior of total us imports (see Figure 4a). Mexican exports reach their high point in July 2007 and then begin a decline culminating in May 2009, leading to a cumulative loss of 35.9%, while the latter accumulated a decrease of more than 39%. The recovery for us imports (with growth of 41%) generated cumulative growth of Mexican exports of nearly 56% by December 2010. It should be noted that the turning points for the two variables coincide, which reflects an immediate effect of external demand on Mexican exports (Table 4).

21 Due to the information available, we have tried to use variables that appropriately represent the corresponding transmission mechanisms, although some of these are more difficult to measure. For example, state fdi suffers from the common “fiscal residence” problem. Moreover, because there is no official information regarding foreign commerce on the state level, we have had to use proxy variables. Despite the limitations on this data, we believe that our conclusions are fairly reasonable and consistent with national and international evidence.

22 Data on exports and remittances was obtained from the Bank of Mexico (www.banxico.gob.mx). fdi data was taken from the Ministry of Economy (www.economia.gob.mx) and RA data was taken from INEGI (www.inegi.gob.mx). Data for total us imports was obtained from the bea (www.bea.gov).

23 Starting from the signing of nafta, the annual average proportion of total exports with respect to gdp substantially increased, going from 13.1% from 1993-2002 to 31.6% in 2003-2010. Similarly, the proportion of manufacturing exports with respect to gdp went from an annual average of 11.4% to 25.9% during the same time periods.

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Published in Mexico, 2012-2018 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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