Formal Employment Declines in Mexico; AI, Trade Tensions Loom

In May 2025, Mexico experienced a net loss of 45,624 formal jobs, the sharpest decline for this month in recent history outside of the pandemic, according to IMSS. The contraction was driven primarily by a reduction of 45,084 temporary positions and 540 permanent ones, marking the second consecutive month of negative job creation after April’s loss of 47,442 jobs.

IMSS attributes the drop to seasonal fluctuations, especially in the agricultural sector. As of May 31, the country registered 22.37 million formal jobs, 87.2% permanent and 12.8% temporary, representing the highest share of permanent employment in 16 years for comparable periods.

Despite maintaining a historically low unemployment rate of 2.59% in April 2025, Mexico’s labor market faces mounting pressures. Employment generation in the first five months of 2025 totaled 133,665 positions, a 58.8% decrease compared to the same period in 2024. Currently, 20 Mexican states are reporting negative employment growth. Campeche leads with a 9.1% contraction, followed by Tabasco at 7.1%, Zacatecas at 3.6%, and Mexico City at 0.8%. From a sectoral standpoint, construction and extractive industries show the most pronounced job losses, registering declines of 7.1% and 5%, respectively.

This local deceleration coincides with a downward revision of global employment forecasts by the ILO, which now projects the creation of 53 million new jobs in 2025, 7 million fewer than previously estimated, writes MBN. This adjustment reflects a more cautious global economic outlook, with GDP growth revised downward from 3.2% to 2.8%. Trade tensions and geopolitical instability are contributing factors, particularly given the vulnerability of approximately 84 million jobs in 71 countries that are dependent on US consumer demand. Mexico and Canada are the most exposed, with 17.1% of their workforces directly or indirectly linked to US trade flows.

Domestically, the labor market is also affected by structural challenges such as informality, underemployment, and limited female participation. While the economically active population reached 61.5 million individuals in April 2025, labor force participation dropped from 60.5% to 59.4%, with men participating at 75.2% and women at 45.4%.

Of the 59.9 million employed individuals, 69.5% are salaried workers, while 21.3% are self-employed without employees. Informality remains high, affecting 54.7% of the workforce, equivalent to 32.7 million people, with slightly higher rates among women than men. Informality rates surpass 76% in states such as Guerrero and Chiapas, in contrast to figures near 30% in Nuevo Leon and Chihuahua.

At the global scale, the ILO report indicates a long-term decline in labor’s share of GDP, which fell from 53.0% in 2014 to 52.4% in 2024. If the 2014 level had been maintained, global labor income in 2024 would have been US$1 trillion higher, or approximately US$290 (MX$5,557) more per worker in real terms. 

The growing adoption of generative AI also poses implications for the workforce. Nearly 25% of workers are expected to experience changes in their job functions as a result of AI integration. Medium-skilled jobs are most exposed, while high-skilled roles are increasingly subject to task automation. 

However, in Mexico, economic recession and trade tensions are seen as more immediate threats to job security. According to the 2025 Edelman Trust Barometer, 77% of Mexican respondents identify an impending economic downturn as the primary risk to employment, followed by trade conflicts (74%) and insufficient training for new technologies (72%). Concerns over AI-related disruption ranked lower on the list.

Although employers retain a higher level of trust than the government, whose approval stands at just 48%, the persistence of informality, gender disparities, and inadequate employment quality continues to challenge the Mexican labor market. Trade, demographic changes, and technological integration will remain key variables in shaping the future of employment in Mexico.