A woman named Lupita operates a small office in Morelia, in the Mexican state of Michoacán, where a remittance pickup counter is nestled between a pharmacy and a tortillería. Over the past year, she’s noticed something that no official government report had to mention. On Mondays, the lines are shorter. When people do visit, the amounts seem to be less than they once were. It’s the kind of information that appears in her register but not in a press release.
It turns out that that minor, local observation reflects a much larger phenomenon. Long dismissed as a footnote to immigration policy or a heartwarming statistic about family ties, Mexico’s remittance figures have subtly emerged as one of the more intriguing indicators of the state of the American labor market. The data has a peculiar role to play. The purpose of remittances was never to gauge employment conditions in the United States. However, the dollar totals end up tracking hiring and wage trends in those industries almost in real time because almost all of the money comes from Mexican workers working in the United States, especially in construction, agriculture, and food service.
Think about what transpired in the middle of the previous year. After more than ten years of almost constant growth, remittances to Mexico experienced a sharp reversal in July, falling 7.5 percent year over year. The slowdown in U.S. construction spending, which fell by almost 3% during the same time period, was identified by Dallas Fed economists as the likely cause. Mexican immigrant labor has always been concentrated in the construction industry, so when concrete trucks in Houston or Phoenix stop moving, the impact is felt a few weeks later in a wire transfer office in Michoacán.
Additionally, it goes beyond hiring. Immigration enforcement appears to have begun manipulating the data to suit its own agenda. The remittance figures may underestimate the number of people who are still employed but experiencing new anxiety because stepped-up crackdowns seem to be pushing some workers toward precautionary savings rather than sending money home. It’s difficult to measure that precisely, so it’s important to be open about the uncertainty.
The read is made more difficult by currency fluctuations. Remittances increased by almost 5% in March earlier this year, marking the best monthly performance in more than a year. However, a portion of that increase was attributable to the depreciation of the peso due to geopolitical tensions between the United States and Iran rather than any underlying increase in the wages of Mexican laborers. The labor story appears far less promising than the headline figure indicates when the exchange-rate effect is eliminated.
The timing of this data is what makes it truly valuable, not merely interesting. Formal U.S. employment reports are updated and delayed. Remittance transfers settle in a matter of days and are becoming more frequent and digital. For some analysts at least, observing the amount of money that flows into Guanajuato from Texas or California has begun to feel like an early indicator of hiring in the informal sector, which is difficult for official statistics to capture.
Remittances are not a perfect replacement for a jobs report because of all of this. However, it’s difficult to ignore the fact that a system designed to help rural Mexican families manage their finances has, almost by coincidence, become a window into working conditions a thousand miles north. It’s unlikely that Lupita ever considered her counter in that manner. More and more economists are keeping an eye on the totals from Dallas and Washington.
