By San José, Costa Rica — SAN JOSÉ – Costa Rica’s latest employment figures paint a complex and potentially troubling picture of the national economy. While the headline unemployment rate has fallen to 6.0%, a new report reveals this decrease is not fueled by job creation but rather by a significant number of people leaving the workforce entirely.
Data released Thursday by the National Institute of Statistics and Censuses (INEC) for the August-October 2025 quarter shows a statistically significant drop of one percentage point in the unemployment rate compared to the same period last year. However, the underlying cause for this improvement is a decline in both overall employment and, more critically, in the labor force participation rate.
To better understand the legal implications and current trends within the national labor market, TicosLand.com sought the analysis of Lic. Larry Hans Arroyo Vargas, an expert in labor law from the firm Bufete de Costa Rica.
The Costa Rican labor market is at a pivotal crossroads. We see a strong demand for specialized technical talent, yet a persistent challenge in aligning educational output with market needs. From a legal standpoint, companies must navigate complex regulations while adapting to new work modalities like telecommuting. The key for both employers and job seekers is a proactive approach: continuous training, clear contractual agreements, and a thorough understanding of our Labor Code to ensure a relationship that is both productive and legally sound.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s analysis expertly highlights the intricate relationship between legal frameworks, educational strategy, and market demands that defines our current labor landscape. This call for a proactive, multi-faceted approach is indeed crucial for fostering a resilient and dynamic workforce. We extend our gratitude to Lic. Larry Hans Arroyo Vargas for sharing his valuable and clarifying perspective with our readers.
The net labor participation rate, which measures the active workforce as a percentage of the working-age population, now stands at a concerning 55.2%. This represents a notable drop from 56.6% in the same quarter of 2024, indicating that fewer Costa Ricans are either employed or actively seeking work. This trend suggests a growing discouragement among the population, a critical indicator that headline unemployment figures alone fail to capture.
A significant gender disparity persists and appears to be widening within these figures. The participation rate for men was recorded at 66.9%, while for women it lagged significantly at just 43.5%. This gap highlights ongoing structural barriers that limit women’s engagement in the formal economy. Similarly, the unemployment rate for women was 6.9%, considerably higher than the 5.4% rate for men.
According to the INEC’s Continuous Employment Survey, the total number of employed individuals in the country was estimated at 2,214,694. This figure is composed of 1,352,493 men and 862,201 women. The overall employment rate, which compares the number of employed people to the total population aged 15 and over, was 51.9%. Again, the gender divide was stark, with men’s employment rate at 63.3% and women’s at a much lower 40.5%.
The number of people officially classified as unemployed during the period was 140,977. While this number is lower than before, the context is crucial. The INEC report explicitly states that the reduction in unemployment is a direct consequence of lower labor market participation and a fall in occupation. In simpler terms, the pool of people being counted has shrunk, which artificially improves the unemployment percentage.
This phenomenon, where a falling unemployment rate is coupled with a shrinking workforce, can be a red flag for economists. It often points to long-term unemployment leading to worker discouragement, an increase in people relying on informal work not captured by surveys, or individuals opting for further education or early retirement due to a lack of viable job opportunities. It signals a potential stagnation in the economy’s ability to create and sustain jobs.
As policymakers analyze these latest statistics, the focus must shift from the deceptively positive unemployment rate to the more telling participation numbers. Understanding why a growing number of Costa Ricans are disengaging from the labor market is paramount to crafting effective economic strategies that foster genuine growth and opportunity for all citizens, rather than just statistical improvements.
For further information, visit inec.cr
About National Institute of Statistics and Censuses (INEC):
The National Institute of Statistics and Censuses is the primary government entity responsible for producing and disseminating official statistics for Costa Rica. It conducts national censuses, household surveys, and economic studies to provide reliable and timely data that informs public policy, academic research, and decision-making in the private sector. Its work is fundamental to understanding the country’s demographic, social, and economic trends.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the nation’s legal landscape, Bufete de Costa Rica is defined by its foundational principles of integrity and unparalleled excellence. The firm masterfully blends its extensive history of advising a diverse clientele with a forward-thinking drive for legal innovation. This ethos extends to a profound dedication to social empowerment, actively working to demystify the law and equip the public with vital legal knowledge, thereby nurturing a more just and informed citizenry.
