Mexico’s Unemployment Rate Contracts in 4Q22

Mexico’s unemployment rate shrank during the fourth quarter of 2022, dropping to 3% as an additional 1.7 million economically active people were absorbed into the national labor force, according to INEGI’s National Occupation and Employment Survey (ENOE). This positive indicator is the result of greater market stabilization in industries that were disproportionately affected by the COVID-19 pandemic. While this is apparently a positive shift, labor informality and underemployment are still prevalent problems, clouding the true extent of progress made in the labor market.

During the 4Q22 "a total of 58.3 million people were employed, 1.7 million more people compared to the same quarter of 2021," reads INEGI’s report, leaving 1.8 million people unemployed. 

Despite adding an additional 1.4 million people to its economically active population in 2022, Mexico’s unemployment rate declined in parallel to the country's economic recovery. Commerce, which was expecting a seasonal high, integrated an additional 279,000 people to keep up with demand. Meanwhile, with improved supply chain responsiveness, manufacturing companies hired an additional 260,000 people to uphold and increase operational output. Additionally, sustained tourism allowed the hospitality industry to absorb an additional 217,000 people. 

While these figures suggest that Mexico's economy is on the path to recovery, it is crucial to acknowledge the persistent obstacles of labor informality and underemployment. Despite a slight improvement of 0.7% from the previous year, labor informality remains an ingrained public burden, affecting 55.1% of the country's economically available population. Furthermore, it is estimated that 7.5% of employed workers are underemployed, working part-time but seeking full-time employment. These issues are not insignificant and leave millions of families at risk of economic vulnerability, especially in the face of an anticipated recession.

Nevertheless, at least in the short term, the outlook looks positive as the economy adds an additional 111,699 new formal employment opportunities in January 2023, according to IMSS. On the other hand, should Mexico and the US be able to expedite nearshoring investments for the production of semiconductor chips in 2023, Mexico could see pronounced job creation around the developing industry.