Following with the jobless recovery

In the last note, we talk about the jobless recovery in Mexico and one of its causes. In this note we present the “wait and see” cause. During a recession and an uncertain future, the companies instead of hiring permanent workers who generate substantial fixed costs of hiring and firing, hire temporary workers or part-time and/or ask their workers to work overtime when the economy begins to emerge from recession. Thus, once it is confirmed that the recession has yielded, companies begin to hire permanent workers to meet increased demand.

The graph shows the number of temporary workers registered to the IMSS for the recessions of 2002 and 2008. In both recessions, temporary employment grew in the months following the trough of the recession, confirming the theory above.