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PP RUEHCD RUEHGD RUEHHO RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHMC #0176/01 1341947
ZNR UUUUU ZZH
P 141947Z MAY 09
FM AMCONSUL MONTERREY
TO RUEHC/SECSTATE WASHDC PRIORITY 3686
INFO RUEHME/AMEMBASSY MEXICO PRIORITY 4741
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEHMC/AMCONSUL MONTERREY 9259

UNCLAS SECTION 01 OF 03 MONTERREY 000176 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD ECIN ELAB MX
SUBJECT: SOME HOPEFUL ECONOMIC SIGNS AS NUEVO LEON EMPLOYMENT LOSSES 
DECLINE 
 
MONTERREY 00000176  001.2 OF 003 
 
 
¶1.      Summary.  Although Nuevo Leon has been heavily affected 
by the U.S. economic recession, the pace of job losses has 
slowed and exports in most sectors have begun to rebound.  The 
manufacturing sector has suffered the most job losses, and 
construction has also been hard hit; services and transportation 
have been less affected.  Nuevo Leon's trends are better than 
the national average, which shows a nationwide loss of 60,000 
jobs in April, far better than December 2008 or January 2009, 
but still worse than February or March.  In addition, a Nuevo 
Leon state agency surveyed 8,000 of the unemployed and found 
that they tended to be young males who had formal jobs and were 
only recently unemployed.  Although the employment statistics 
are hopeful, most business leaders do not expect an economic 
recovery until 2010.  End summary. 
 
 
 
Substantial Employment Losses in Nuevo Leon 
 
 
 
¶2.      The state of Nuevo Leon its capital Monterrey have 
heavily benefited from NAFTA by developing export industries 
focusing on heavy consumer goods such as cars and home 
appliances, in addition to an emerging service industry.  Nuevo 
Leon has been very successful capturing direct foreign 
investment, resulting in a per capita income twice the Mexican 
standard, plus significantly higher educational levels. 
However, Nuevo Leon's great exporting success has also left it 
vulnerable to U.S. economic trends.  Local economists forecast 
that although Nuevo Leon was affected earlier than other parts 
of Mexico, Nuevo Leon could also recover faster following a U.S. 
economic recovery.  Finally, a state economist argued that Nuevo 
Leon's unemployment statistics were more reliable indicators 
than other states because Nuevo Leon has a higher percentage of 
formal employment. 
 
 
 
¶3.        Nuevo Leon has suffered substantial employment losses, 
but they have started to slow.   The Nuevo Leon Secretary of 
Economic Development and the Nuevo Leon Council of Labor 
Relations and Productivity both provided employment studies to 
econoff.  From October 2008 through March 2009 Nuevo Leon 
suffered 69,255 job losses (measured by the IMSS insurance 
rolls) or 5.8% of Nuevo Leon's formal employment.  The 
employment losses were most severe in December 2008, when Nuevo 
Leon lost 32,391 jobs, but slowed in January (-15,859), February 
(-9,057), and March (-2,585), although they ticked up again in 
April (-6,915).   The hardest hit sectors between October and 
March were manufacturing which lost 34,114 jobs (9.2% of total 
employment in the sector), construction lost 17,255 jobs 
(15.2%), transport shed 3,996 jobs (5.1%) commerce 6,700 jobs 
(3.1%), and services employment fell by 6,706 jobs (2.4%). 
 
 
 
¶4.      Nuevo Leon's job losses would have been much more severe 
except that many manufacturing plants are on reduced hours or 
shifts, or the plants have closed temporarily.  The Nuevo Leon 
Council of Labor Productivity estimated that 75 companies have 
reduced work hours for between 2,000 and 20,000 employees, an 
estimate that strikes us as conservative.   John Castany, 
President of the Nuevo Leon Maquila Association, estimated that 
30-40% of their members have reduced hours or plants, including 
Castany's own enormous Thomas & Betts plant which is idle one 
day per week.  Castany also said that to save jobs the unions, 
including CROC and CTM, have shown great flexibility permitting 
reduced hours for all employees.  Employers are also loathe to 
fire employees due to Mexico's very generous severance 
requirements. 
 
 
 
¶5.      Nuevo Leon has fared worse than the national average, 
but better than some border states.  Mexico lost an average of 
4.1% of its formal employment from October 2008 through March 
2009, better than Nuevo Leon.  The nationwide job losses did not 
begin until November, (-59,000), followed by a very tough 
December (-327,000) and January (-105,000), easing in February 
(-47,000) and March (+13,000) but with another decline in April 
(-60,000).  Some border states have done worse; from October 
through March Chihuahua lost 13.6% of employment and Baja 
California fell 10.2%, since they are even more focused on 
maquila exports to the U.S.  However, the center of the country, 
emphasizing the national market, has suffered less, as the 
populous State of Mexico, (right next to Mexico City) lost 4.2% 
of formal employment, and Jalisco, home of the industrial 
powerhouse Guadalajara, only shed 2.8% of formal employment.  In 
 
MONTERREY 00000176  002.2 OF 003 
 
 
terms of sectors, on an annualized basis through April, there 
have been 484,852 job losses nationwide, concentrated in the 
sectors of manufacturing (-423,114) and construction (-114,308), 
with small losses or even gains in the other sectors. 
 
 
 
Survey of Nuevo Leon Unemployed 
 
 
 
¶6.       The unemployed in Nuevo Leon tend to be young males who 
had a formal job but have only been unemployed for several 
months.  Note.  A person is considered unemployed in Mexico if 
they work less than 15 hours per week.  End Note.  The Nuevo 
Leon Council for Labor Relations and Productivity conducted a 
survey of 8,000 of the unemployed from January through March 
¶2009.  The survey found that 57% of the unemployed had worked at 
formal jobs, and 43% had informal employment.   In addition, 71% 
of the surveyed people were men.  The respondents were young, 
between ages 18-25 (32.4%), 26-30 (17.1%), 31-40 (27.7%), 41-50 
(16.2%), 51-55 (3.8%). 56-60 (2.4%) and very few were more than 
60 years old (0.3%).  Finally, they had recently lost their 
jobs.  The survey was conducted from January to March 2009; 39% 
lost their jobs during that time, 20% in December 2008, 15% in 
November, 13% from August through October, and the rest were 
long term unemployed, having lost their jobs from January 
through July 2008 (6%) or prior to January 2008 (8%). 
 
 
 
Exports Show a Light at the End of the Tunnel? 
 
 
 
¶7.      Nuevo Leon's export statistics show a free fall through 
January 2009, but the February numbers show a partial rebound. 
In general Nuevo Leon's exports to the U.S. increased 9.2% in 
2008 compared to 2007, but the annual statistics mask that 
exports declined 15% in the last quarter compared to 2007. 
However, monthly exports in February increased from the trough 
in January, growing from slightly over $600 million USD in 
January to over $900 million USD in February.  Nuevo Leon's 
automotive exports continued to decline in February, while Nuevo 
Leon's exports of home appliances, electronics and machinery 
rebounded to create an overall improvement. 
 
 
 
¶8.      Nuevo Leon business leaders are pleased that the rates 
of job loss have slowed, but they do not expect Nuevo Leon to 
recover until at least 2010, riding on the recovery of the 
United States economy.  Carlos Mortera of the Nuevo Leon 
Association of Manufacturing Technology did not expect a 
recovery until 2010 or 2011, with a Nuevo Leon recovery 
depending on a strengthening U.S. economy.  Castany was more 
pessimistic, predicting that the recovery could take three to 
five years.  In addition, Castany thought that there could be 
significant increase in layoffs in several months, as employers 
have reduced hours to hold off on firing employees.  However, if 
orders do not improve, this could force their hand to lay off 
more employees. 
 
 
 
¶9.      The H1N1 flu closures appear to have had severe affects 
for the tourism and business travel industry but little impact 
on manufacturing.  In Monterrey, the tourism and travel industry 
focuses on business travelers and conventions rather than pure 
pleasure travel.  Monterrey has seen many conventions and 
business trips cancelled through June, and hotel occupancy is 
now down from a normal 60% to 20%.  Although people are starting 
to go out to restaurants, it is not clear if visitors will come 
back in several months.  As to manufacturing, David Martinez, an 
economist for the state of Nuevo Leon, argues that the H1N1 
closures, which were two days longer than the normal three day 
closing for Easter week, cost Nuevo Leon 1% of its manufacturing 
GDP.  Business leaders are more skeptical in private, since many 
plants had few orders.  Moreover, an American Chamber of 
Commerce official reported that based on reports from border 
customs brokers and Kansas City Southern railroad, Mexican 
exports continued at normal levels.  Since the H1N1 flu did not 
cause damage to facilities, Nuevo Leon's manufacturing industry 
should show no long term impact beyond the May 1-5 closures. 
 
 
 
¶10.  Comment.  Based on our meetings, we expect that Nuevo 
Leon's economy will continue to decline through the third 
 
MONTERREY 00000176  003.2 OF 003 
 
 
quarter of 2009, after which it will follow, after a lag, a U.S. 
economic recovery.  Although we are still likely to see more 
layoffs in Nuevo Leon, the worst could be over in terms of 
employment losses as companies have resorted to reduced shifts 
to tide them over until the economic recovery.  However, Nuevo 
Leon's economy may not be typical of Mexico as a whole.  Nuevo 
Leon is more oriented toward exports, so the economy in the rest 
of Mexico may depend more on national consumer demand.  End 
Comment. 
WILLIAMSON