OECD Employment Outlook 2022

Mexico

Labour markets have continued to improve in 2022, but the outlook is uncertain

Total employment in the OECD returned to pre‑crisis levels at the end of 2021 and continued to grow in the first months of 2022. The OECD unemployment rate gradually fell from its peak of 8.8% in April 2020 to a level of 4.9% in July 2022, slightly below the 5.3% value recorded in December 2019. However, the labour market recovery has been uneven across countries and sectors and is still incomplete, while its sustainability is challenged by the economic fallout of Russia’s unprovoked, unjustified, and illegal war of aggression against Ukraine.

• At the very beginning of the COVID‑19 pandemic, Mexico experienced one of the largest drops in employment figures of the whole OECD area. However, thanks to the rollout of effective vaccines, a gradual recovery in tourism and the resumption of internal consumption, by the summer of 2022 its total employment was even slightly higher than at the end of 2019 (62.6% in July 2022 versus 62.4% in December 2019). By comparison, some OECD countries – including the United States and the United Kingdom – have yet to fully return to pre‑crisis level.

• Similarly, after more than two years since the onset of the COVID‑19 crisis, the unemployment rate has finally returned to pre‑crisis levels also in Mexico. In particular, after jumping to 5.5% at the peak of the crisis in June 2020, in July 2022 Mexico’s seasonally adjusted unemployment rate was back to a level (3.3%) similar to the one of December 2019 (3.2%).

• By contrast, Mexico has still to reabsorb the initial increase in inactivity that took place in all OECD countries in 2020 as the pandemic discouraged active job search. For instance, inactivity rates in Mexico remain above pre‑crisis levels by roughly 1 percentage point. Older adults, and in particular those in the 65‑to‑74 age group, are the ones most likely to be inactive in Mexico. In fact, as the risks linked to COVID‑19 grow with age, many older adults chose to leave work earlier during the pandemic. As a result, inactivity rates for the 65‑to‑74 age group remained almost 4 percentage points higher in Q4 2021 relative to Q4 2019.

• Besides, while at the onset of the pandemic the share of workers (both young and adults) who worked in the informal economy drastically dropped due to the instability of their positions, Mexico’s informality rate moved back to 56% in March 2022 due to the reopening of the economy (only 2 percentage points below the pre‑crisis average).

Figure 1. Labour markets have continued to improve across the OECD in 2022

Note: Latest month available refers to May 2022 for the United Kingdom and to August 2022 for the United States.

Source: OECD (2022), “Unemployment rate” (indicator), https://doi.org/10.1787/52570002-en (accessed on 2 September 2022).

Young people are still lagging behind older adults in the recovery

Young people were particularly affected by the initial ravages of the crisis. By Q1 2022, on average across the OECD, young people had recovered much of the lost ground, but were still lagging behind older adults. The employment rate of those aged 15 to 24 years was below pre‑crisis levels in a majority of OECD countries and, on average, just at the level of Q1 2019. By contrast, it had increased over the same period by 1 and 3 percentage points, respectively, for adults aged 25‑54 and 55‑64.

• In line with most of the OECD area, where youth employment had yet to recover from the COVID‑19 crisis, by the beginning of 2022 Mexico saw its young population (people aged 15‑24 years) slightly deteriorate their employment prospects compared to their pre‑crisis levels.

• In Mexico, hiring of young people in the aftermath of the COVID‑19 pandemic was not disproportionally heightened by temporary contracts. In fact, the share of young people on temporary contracts was virtually the same in Q4 2021 and Q4 2019, alleviating the concern that firms have switched to short-term employment contracts to mitigate the financial uncertainty due to the crisis.

• Such sluggish recovery in youth employment levels in Mexico was largely associated with a rise in inactivity – which increased by 0.4 percentage points – but also with a small drop in the share of jobseekers among young people (- 0.2 percentage points).

Figure 2. Young people are still lagging behind older adults in the recovery

Note: OECD is the unweighted average of 34 OECD countries (not including Colombia, Costa Rica, Israel and Türkiye).

Source: OECD Employment Outlook 2022, Chapter 1.