Mexico’s Employment Numbers Don’t Tell the Full Story: BBVA

Mexico enters 2026 with modest formal employment growth, structural challenges in productivity, and regional disparities, according to a recent report by BBVA Research. While official figures show continued expansion of formal jobs, underlying dynamics suggest a fragile labor market that could limit economic resilience and growth.

BBVA Research highlights that the reported 1.3% annual growth in formal employment for 2025, equivalent to roughly 213,000 net additions in the Mexican Social Security Institute (IMSS), masks a deeper weakness. A significant portion of this increase stems from the inclusion of workers from digital platforms (TPD) into the social security system. These registrations, while positive for coverage, do not represent genuine job creation, as many of these positions already existed informally. When the TPD effect is removed, the adjusted growth of formal employment falls sharply to 0.3%, leaving only about 72,000 new jobs that can be considered genuine additions. BBVA notes this is the lowest net growth since 2010, excluding the 2020 pandemic collapse.

The report underscores that this gap between reported and real employment — a 74% difference — reflects a labor market under pressure. Low investment, cautious employer behavior, and persistent informality continue to constrain the economy’s capacity to generate high-quality jobs.

Investment and Business Confidence Lag

BBVA Research connects the stagnation in formal job creation to a broader crisis in investment. In October 2025, Mexico’s formation of gross fixed capital fell 5.8% in real terms, with machinery and equipment down 10.3%. Companies are not only refraining from expanding but are also postponing renewal of basic productive assets.

Indicators of business sentiment reflect this caution. The National Institute of Statistics and Geography (INEGI) reports that the “moment to invest” component of the Global Business Opinion Indicator of Confidence remains at 35.8 points, far below the neutral 50-point threshold, and has stayed in pessimistic territory for 151 consecutive months. The assessment of economic conditions sits at 46.4 points, below 50 for 11 consecutive months. This persistent lack of confidence dampens the willingness to hire, invest, or adopt new technologies.

Weakness is concentrated in sectors traditionally driving employment. Agriculture contracted 3.9% in 2025, marking 28 months of negative growth. Manufacturing, the country’s main employment engine, lost 2.1% of jobs, which BBVA Research describes as a “lost year” for the sector. Construction fell 2.3% annually, with cumulative losses since September 2024 reaching 11.9%.

Conversely, growth in communications and transport appears inflated due to the registration of TPD, while commerce grew 3.1% and services 1.6%, both below historical averages.

Regionally, the effects of reduced federal infrastructure investment are evident. The South saw universal employment declines, notably Oaxaca with 1.3% and Campeche with 8.3%. The metropolitan region, including Mexico City and the State of Mexico, posted gains primarily linked to platform workers rather than traditional employment expansion. Tourist areas such as Baja California Sur and Quintana Roo grew modestly, while the Bajío and Western states showed relative resilience, with Queretaro, Hidalgo, Jalisco, and Colima above the national average once TPD effects are excluded.

Despite weak job creation, formal wage growth remained robust. The real average salary for IMSS-affiliated workers increased 3.1% in 2025, while the aggregate real wage mass grew 4.4%. When adjusting for TPD inclusion, this mass rises only 3.4%, highlighting underlying weaknesses. Lower-than-expected income growth could constrain domestic consumption in 2026, particularly among households outside the formal system.

Policy Reforms and Labor Market Adjustments

Public policy is a central tool to address these structural constraints. The federal government implemented a 13% minimum wage increase in January 2026, raising the daily rate to MX$315.04 (US$17.26), and is preparing for a gradual reduction of the standard workweek from 48 to 40 hours starting in 2027. 2026 is designated as an adaptation year, allowing businesses to reorganize shifts and implement electronic timekeeping systems. Minister of Labor Marath Bolaños says that the reform aims to improve worker well-being while maintaining economic competitiveness, based on tripartite consultations with unions, employers, and academic experts.

The expansion of social security coverage to digital platform workers represents another policy milestone. As of Jan. 1, 2026, about 900,000 platform workers gained access to benefits, signaling a continued push toward formalization. While this reduces informality in registration, analysts caution that formalization must translate into higher job quality, training, and productivity to have lasting impact.

Talent Development and Regional Opportunities

Addressing Mexico’s labor challenges also requires closing skill gaps. BBVA Research notes that nearshoring and global supply chain integration create high demand for technically skilled workers, yet 68% of Mexican employers report difficulties in sourcing qualified personnel in advanced manufacturing and digital technologies. Initiatives such as “Aprendices Digitales México” and partnerships with the UK aim to expand professional skills in AI, cloud computing, and cybersecurity.

Regional hubs like Queretaro exemplify opportunities. The state’s tech sector grew 12% in 2025 and is projected to expand up to 23% in 2026, driven by cybersecurity, AI, and compliance-related software. Investments from Amazon Web Services, Microsoft, and DHL strengthen digital infrastructure and create formal employment, demonstrating the link between targeted investment, human capital, and labor market resilience.

Informality and Demographic Challenges

However, the economy is being hit by a persistent “informality tax. Over 55% of Mexico’s workforce remains informal, resulting in high turnover, limited access to training, and fragile supply chains. Youth unemployment in Latin America stands at 11.9%, and gender participation gaps exceed 24 percentage points. These structural constraints reduce the effective labor pool and limit productivity gains.

While some improvement in formal employment is expected in 2026, it will likely be insufficient to restore pre-pandemic growth momentum, says BBVA Research. A genuine recovery depends on increased productive investment, enhanced business confidence, structural reforms, and targeted human capital development. Formalization, beyond statistical adjustments, emerges as a prerequisite for sustaining competitiveness and translating employment growth into economic resilience.

As Mexico navigates moderate GDP forecasts between 1.2% and 1.5% alongside regulatory reforms, policymakers and businesses face a crucial test: converting formal employment gains and social security coverage into higher productivity, lower turnover, and a labor force prepared for the demands of a modern, nearshoring-driven economy.