In a dramatic turn of events, Mexico’s labor market witnessed a substantial contraction in June, losing 863,862 jobs. This downturn effectively nullified the job gains made earlier in the year, reducing the employed population to 58.9 million, a figure lower than December 2023’s 59.1 million, as reported by the National Survey of Occupation and Employment (ENOE).
The labor market had previously demonstrated promising growth, particularly in the first quarter of 2024. However, the June decline represents the most significant contraction since November 2023, when 1.2 million jobs were lost. Analysts attribute this downturn to several factors, including a slowdown in economic activity and the conclusion of temporary labor contracts associated with electoral campaigns.
Janneth Quiroz, Director of Economic, Foreign Exchange, and Stock Market Analysis at Monex, highlighted the ongoing economic slowdown as a key factor. “It has to do with the slowdown in economic activity that we are seeing throughout 2024, which began in the last quarter of last year, and we see that economic growth has been slower. In addition, in June, all the temporary labor that participated in the electoral campaigns ended their contracts,” Quiroz explained.
As a consequence of these developments, the unemployment rate rose from 2.6% to 2.8%, marking its highest level since January 2024. Notably, the Non-Economically Active Population (PNEA) saw a significant increase of 652,669 individuals, indicating that many who lost their jobs became inactive. Gabriela Siller, Director of Economic and Financial Analysis at Banco Base, emphasized this trend: “The EAP has decreased significantly, and they are not part of the working population; they have completely left the labor market.”
While the reasons behind this trend remain complex, Siller does not dismiss the possibility that the conclusion of the electoral process and government monetary transfers may be influencing labor market participation.
The uptick in unemployment and the PNEA contributed to a rise in the extended unemployment rate, which increased from 9.9% to 10.2%, the highest level since January. A staggering 96% of the job losses were concentrated in the informal sector, with the formal sector experiencing a more modest reduction of 33,471 jobs. This aligns with reports from the Mexican Social Security Institute (IMSS) and the decline in registered jobs.
According to Quiroz, the results in the informal sector are concerning as they were not offset by formal employment gains. “It is not so positive because it tells us about a loss of employment that is reflected in the June figures,” she noted. This situation led to a reduction in the informality rate from 54.4% to 53.8%, its lowest since December 2023. However, Siller cautioned against interpreting this as a positive trend, explaining, “It seems that there are fewer informal workers, but it is really a mathematical effect. The informality rate has decreased very slowly. If we wanted to reach the informality rate in Chile, which is 25%, at the rate that it is decreasing in Mexico, it would take us more than 100 years.”
The underemployment rate, another crucial labor market indicator, saw a slight monthly increase of 0.1 percentage point to 7.5% of the employed population, still far from pre-pandemic levels. Underemployment includes workers seeking more hours than their current jobs provide.
All economic sectors experienced job losses, with the industrial sector leading with a cumulative loss of 541,961 jobs. Within this sector, construction suffered the most, losing 479,531 jobs. The services sector followed with a decrease of 231,538 employed persons, with restaurants and professional services experiencing the most significant losses.
The agriculture, fishing, and livestock sectors also saw a reduction of 71,135 jobs, continuing their negative trend for the second consecutive month. Employment types were also affected, with employers and self-employed individuals accounting for 92% of the contraction, losing 425,238 and 370,608 jobs, respectively. The only employment category that saw growth was unpaid work, with a modest increase of 12,778 jobs.
Janneth Quiroz emphasized the importance of fostering formal employment growth, particularly given the absence of a tax reform in 2025. “Going forward, it will be important for formal employment to continue to increase, especially considering that there will be no tax reform for 2025, and the ideal is for the tax base to continue to increase so that public finances maintain a good performance. But the June results show a slowdown in line with the macroeconomic situation. We will have to wait and see if this was an isolated event and if we see a recovery in the following months,” Quiroz stated.
Gabriela Siller echoed this sentiment, warning that the labor market deterioration could persist due to further economic slowdowns, negatively impacting employment prospects. The coming months will be crucial in determining whether Mexico’s labor market can rebound from this setback and regain its footing amid economic challenges.