Paid Employment Rises 1.3% in Mexico Despite Weak Investment

Mexico recorded a 1.3% annual increase in paid employment during the second quarter of 2025, reaching 40 million positions across economic activities, according to data from the National Institute of Statistics and Geography (INEGI). The expansion, while moderate, reflects continued labor-market stability even as investment indicators show persistent weakness.

The states with the strongest annual job growth were Nuevo Leon (3.8%), Hidalgo (3.6%), and Mexico City (3.0%), followed by Queretaro and Sinaloa, both at 2.6%. Wage payments also rose, reaching MX$9.93 trillion, an annual increase of 6.5%. Hidalgo, Guanajuato, and Nuevo Leon reported the biggest wage expansions at around 9% to 10%. 

The labor market results come as Mexico prepares for a 13% increase in the minimum wage starting January 2026. President Claudia Sheinbaum confirmed the adjustment, which will raise the daily minimum wage to MX$315.04  (US$17.26) nationwide and MX$440.87 (US$24.15) in the northern border zone, the latter increasing by 5%. The rise is lower than the double-digit increments applied during previous years. The government argues that the policy aims to bring the minimum wage to a level equivalent to 2.5 basic goods baskets during the current term.

Financial analysts warn, however, that higher labor costs may generate pressure on SMEs and slow formal job creation. Banamex says the continued pace of minimum wage increases could limit the benefits of recent income policies and lead to adverse effects for firms facing higher payroll expenses. The institution points to the risk of reduced formal employment, financial stress for smaller businesses, and persistent price pressures amid a low-growth environment. It also recommends alternative measures to support household welfare without amplifying inflation or weakening competitiveness, including productivity improvements, investment in technological infrastructure, targeted policies for human capital development, and higher female labor participation.

The broader economic picture shows signs of deceleration. INEGI reports that gross fixed investment fell 0.3% in September 2025, following a 3% decline in August. The indicator, which tracks spending on machinery, equipment, and construction, has registered two consecutive months of contraction and remains in negative territory. Weakness in construction, which dropped 2.6% in the month, drove most of the decline. Residential construction fell 3.9%, while nonresidential construction decreased 0.9%. Investment in machinery and equipment rose 1.9%, supported mainly by imported goods, which increased 3.8%.

On an annual basis, fixed investment fell 8.4%, reflecting pronounced declines in construction and domestic machinery and equipment. Nonresidential construction dropped 16.4%, and national machinery and equipment contracted 10.6%. The trend signals weaker productive momentum and growing uncertainty in the business environment.

Part of this uncertainty arises from trade policy developments. In September, Mexico introduced a proposal to raise tariffs on 1,463 tariff lines, a measure interpreted as an attempt to limit China’s involvement in the local automotive sector and raw material supply chains. Analysts note that the proposal also signals a preference for deeper integration with the US market. However, higher tariffs are expected to create cost pressures for producers and consumers. The global risk environment was further affected by the continuation of protectionist rhetoric from the US, including tariff-related communications that heightened volatility even as the US reached agreements with several countries later in the quarter.

Meanwhile, Mexico’s central bank reduced its benchmark rate by 25 basis points to 7.25% during November, in line with market expectations and reflecting gradually easing inflation. Yet tighter financial conditions, slower investment, and global uncertainty continue to influence the country’s economic outlook.

The combination of moderate employment growth, rising wages, and declining investment illustrates the mixed conditions shaping Mexico’s economic trajectory. While labor market figures show resilience, the slowdown in capital formation and the impact of upcoming wage adjustments will influence business expectations heading into 2026. Firms will assess how higher labor costs, lower investment momentum, and evolving trade policies affect production plans and hiring decisions in the coming year.