Labor Market Struggles in Mexico Amidst Upcoming Tariffs
The Mexican labor market, already facing challenges, is set to encounter additional hurdles due to the tariffs imposed by the United States. Experts warn that the current economic climate is not favorable for job creation and participation.
Recent Labor Market Trends
- Employment Decline: The latest data from the National Survey of Employment and Occupation (ENOE) reveals a loss of 276,937 jobs in February—nearly double the number of positions created at the start of the year.
- Sluggish Growth in 2024: Job creation in 2024 was also subpar, with a mere 174,656 positions generated—the slowest pace of the last decade, excluding pandemic effects.
Upcoming Tariffs’ Impact
Reciprocal tariffs will take effect on April 2 for all countries with significant US trade. Mexico is not exempt from these measures. The following day, tariffs on non-US-manufactured vehicles will commence.
Potential Sectoral Impacts
Ana Gutiérrez, Coordinator of International Trade and Labor Market at the Mexican Competitiveness Institute (IMCO), highlights that initial impacts might be severe in sectors with high export volumes. Key areas include manufacturing jobs, logistics, transportation, storage, retail, and services.
Manufacturing Sector Concerns
February saw a significant reduction in employment within the manufacturing sector, eliminating 144,603 jobs. The industry has experienced three consecutive months of occupation declines and is currently short by 356,712 positions compared to one year ago.
Expert Opinions on Future Employment
Guillermina Rodríguez, Banamex’s Director of Economic Studies, expects a modest job growth of 0.7% in 2025, assuming zero GDP growth due to tariff uncertainty.
- Low Employment Forecasts: Rodríguez predicts around 150,000 formal job creations, a “quite low” figure even compared to the previous year, given potential tariff impacts beyond automotive and steel sectors.
- Decreasing Labor Force Participation: February’s labor participation rate dropped to 58.7%, its lowest in three years, likely due to fewer individuals entering the job market amid growth expectations.
Uncertain Tariff Impact
While precise predictions are premature, experts agree that a tariff-driven slowdown in employment is plausible. Factors include cautious investment and reduced job generation.
The KPMG report “Perspectives of Senior Management in Mexico” indicates that 22% of executives consider geopolitical conflicts the most significant factor influencing future investments, following nearshoring opportunities and client needs.
