Economics: Covid’s toll on the jobs market remains even as restrictions ease

MEXICO - Report 24 May 2021 by Mauricio González and Francisco González

Mexico’s labor market in the first quarter of 2021 continued to be defined and deeply affected by the Covid pandemic. While formal employment as measured by the number of workers enrolled with the Mexican Social Security Institute (IMSS) dropped an annual 2.9% in the first quarter, it managed to eke out a marginal 0.7% recovery in April. However, this recovery was limited to temporary jobs. The number of permanent jobs remained locked into a downtrend that began a year ago.

During the first quarter of 2021, both the national and urban unemployment rates were slightly higher than at the end of 2020. The national rate was 3.9% of the Economically Active Population (EAP) while the corresponding figure for the urban unemployment was 5.1%; last December the numbers were 3.8% and 4.8%, respectively. These numbers, however, mask the reality of a downturn in household income, due to many job applicants' taking whatever employment options emerge, often in poorly paid jobs that provide fewer hours than they were accustomed to or than they need.

Two main factors that have led to a drop in household job income that are not directly reflected in the unemployment rate are the reduction in the economically active population, which decreased considerably as of March 2020, as well as a major increase in disguised unemployment, the economically inactive population that wishes to work to work. Underemployment is also a major feature of the current labor market. As of the first quarter of 2021, the underemployed population stood at 7.3 million, 60% greater than in the same period of 2020. Its numbers are expected to remain high throughout 2021.

With a tapering of Covid numbers and the lifting of the pandemic restrictions, there has been a slight improvement in economic expectations. Nevertheless, the absence of public policies that promote economic reactivation and an adverse environment for private investment represent obstacles to a more robust recovery.

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