“We are facing a vicious circle in which less is invested, less is hired and less is spent. This keeps the internal economy stagnant,” warned Gabriela Siller, director of Economic Analysis at Banco BASE, during the presentation of third quarter perspectives.
A more precarious labor market
Between January and September 2025, the economy generated 333,303 formal jobs affiliated with the IMSS, which represents a creation 26.97% lower than that observed in the same period of 2024, being the lowest figure since 2009 (and excluding the drop in 2020). In addition, employers affiliated with the IMSS have accumulated 17 consecutive months with annual declines, a behavior seen in economic crises.
At the same time, the labor informality rate increased to 54.88% in September, with a total of 32 million people, its highest level since 2021.
“The Mexican economy is not generating enough jobs to absorb the new active population,” said Siller, adding that informality is absorbing part of the lost employment, but reflects the lack of formal jobs and the more precarious conditions of the labor market.
Fewer remittances and constant food inflation
The cooling of employment is combined with a deterioration in remittances, which have lost around 13% of their purchasing power. Added to this are cuts in public spending and persistent food inflation, factors that reduce household disposable income.
“Although wages maintained real growth, the total income of families slowed down due to lower employment, weak remittances and more cautious consumption,” explained Alejandro Saldaña, chief economist at Banco Ve por Más.
The still high interest rates, the shortage of credit and the loss of consumer confidence are reflected in stagnant private consumption, the first to be recorded since 2020. Of the seven months of 2025 with available information, four have been contractions for private consumption, an indicator to which almost half of Mexico’s GDP is attributed (48%).
Investment does not rebound
After the so-called first wave of nearshoring ended, gross fixed investment shows a significant contraction of 7.19% and accumulates eleven consecutive months of negative annual rates, according to data up to July 2025. In addition, public spending on infrastructure fell. 33.7% between January and August—the deepest decline on record.
The uncertainty associated with US trade policy and changes in the country’s institutional framework, together with less dynamism in public works, caused a contraction in investment. “This in turn weakened job creation. The growth in household income slowed down due to lower job creation, although salaries maintained real growth,” said Alejandro Saldaña.
The World Cup in 2026 will not be enough
The chief economist of Banco Bx+ considers that the export rebound has not translated into investment or employment because trade uncertainty with the United States persists. However, it foresees that the update of the T-MEC in 2026, together with lower interest rates and greater spending linked to the Soccer World Cup, will trigger a slight rebound in investment and domestic consumption.
“Once the T-MEC is updated and rates are lowered, investment and consumption could show somewhat more favorable dynamics.”
Banco BASE, for its part, projects that the Mexican economy will grow around 1% in 2026, with real wages practically without progress and consumption still weak.
The recovery will depend on whether the government manages to reverse the collapse in investment and restore private sector confidence. “Mexico needs to strengthen its productivity and formalize employment if it wants to break the stagnation,” Siller warned. Otherwise, Mexico could maintain export-driven growth, but with an increasingly weak domestic market.
In 2026, the reduction in government aid and transfers will be added. The data show that public spending on subsidies and transfers fell 4.1% annually at the end of August and other social supports fell more than 60% in the first eight months of the year.
With underlying inflation still high, especially in food merchandise, this lower flow of public resources accentuates the pressure on real incomes and limits the margin for recovery of private consumption for the following year.
