Latin America sees lowest unemployment, reduced informality in 2025; ILO notes consolidation phase

Latin America experienced a positive evolution in its labor markets during 2025, achieving one of the lowest unemployment rates in decades and a reduction in informality, according to a report by the International Labour Organization (ILO).

The ILO's "Labor Market Trends in Latin America and the Caribbean" report indicates that the region has moved from a post-pandemic recovery phase to a consolidation stage. In this new phase, structural factors are increasingly influential in shaping key labor indicators. The overall unemployment rate dropped to 5.3%, a significant achievement largely driven by the creation of formal jobs, signaling a positive trend toward labor formalization.

This decrease in unemployment was widespread across various subregions. It was influenced by a slower expansion of the labor supply, reflecting a combination of cyclical and structural factors such as demographic transitions, stabilized participation rates, and a gradual increase in female labor participation and employment. The report also noted a decrease in the informality rate, reaching its lowest point since the pandemic began, suggesting a gradual formalization process and an improved composition of regional employment.

However, the ILO also highlighted persistent structural challenges. Nearly half of the employed population in the region continues to work under informal conditions, with considerable variations among countries, economic sectors, age groups, and genders. Women, in particular, still face obstacles in accessing and maintaining employment, often linked to the unequal distribution of care responsibilities. The report emphasizes that while the average informality rate has decreased, deep disparities persist, necessitating differentiated policy responses tailored to each country's labor market development, insertion type, economic unit characteristics, and territorial particularities.

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The evidence indicates that the labor market has moved from the post-pandemic recovery phase to a consolidation stage, in which structural factors are increasingly important to explain the evolution of the main labor indicators.