If the amount of money sent home by Mexicans working in the US provides any gauge of the health of the US economy, then there is good news for President Joe Biden.
Remittances to Mexico hit a new high of $5.3 billion in July, according to data from the Mexican Central Bank. That brings the total since January to $32.8 billion, or 16 percent higher than the same period a year ago.
After a dip at the start of the pandemic, remittances to Mexico proved surprisingly resilient. They rose year over year in 2020 and reached record levels in 2021. Those are likely to be surpassed again this year.
About 11 million Mexican-born immigrants live in the US. There are an additional 25.5 million US-born Hispanics of Mexican descent. The money they send back accounts for about 95 percent of all remittances to Mexico.
Compared to its southern neighbor, the US has recovered from the pandemic more quickly – at least in terms of employment. The US labor market remains tight. Despite the unemployment rate rising to 3.7 percent in August, it remains near historic lows. In the service sector, where many Mexican immigrants work, hourly and weekly wages are higher than the national average.
Still, remittance trends are an imperfect economic indicator. To begin with, it is a lagging measure. The numbers could also be boosted by a shift to electronic transfers during the pandemic. These transfers, unlike cash brought across the border, are more common in official records.
Altruism is also important. Some studies have shown that remittances can also be counter-cyclical, regardless of the health of the host economy. Mexicans living in the US could send more money home to help their families cope with rising inflation.
The fact that remittances are now good for 4 percent Mexico’s GDP, which exceeds the combined value of oil production and tourism as a source of foreign exchange, speaks to the relative strength of the host country as much as the weakness of the Mexican economy itself.
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