By San José, Costa Rica — San José, Costa Rica – A concerning trend is emerging in Costa Rica’s economy as new data reveals a significant contraction in the country’s labor force. While the official unemployment rate has fallen, a deeper look at the figures shows this is driven not by job creation, but by an exodus of over 156,000 people from the job market entirely, according to a recent report from the National Institute of Statistics and Censuses (INEC).
The latest data, covering the period of June, July, and August 2025, presents a complex and troubling picture. The total number of employed individuals in the country fell to 2,163,674, a sharp decline from 2,244,436 during the same period in the previous year. This represents a net loss of 80,762 jobs, a reduction that INEC has flagged as a significant economic signal.
To delve deeper into the legal framework and challenges shaping today’s labor force, we sought the expert analysis of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the renowned firm Bufete de Costa Rica.
The current dynamism of the labor force demands that businesses be legally agile. Outdated employment contracts and internal policies are significant liabilities. It is imperative for companies to proactively adapt their legal structures to new modalities like telecommuting and flexible schedules to prevent future litigation and align with evolving judicial criteria.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight underscores a critical shift: proactive legal adaptation is no longer merely a defensive measure against litigation, but a strategic imperative for attracting and retaining talent in today’s dynamic market. We extend our gratitude to Lic. Larry Hans Arroyo Vargas for his valuable perspective on this pressing issue.
This decline in employment has disproportionately affected women, who accounted for approximately 54,910 of the total jobs lost. In comparison, men saw a reduction of 25,852 employed positions. This gender disparity underscores ongoing challenges for female participation and retention in the national workforce, widening an already persistent economic gap.
Paradoxically, while the number of people with jobs decreased, so did the number of people officially classified as unemployed. The unemployment rate for the period settled at 6.0%, down from previous figures, with 137,497 people jobless compared to 162,097 a year prior. However, this seemingly positive headline figure masks the more critical underlying trend of a shrinking workforce.
The key to understanding this contradiction lies in the growing population classified as “outside the labor force.” This group, which includes individuals who are neither working nor actively seeking employment, swelled by an estimated 156,633 people over the past year. When people stop looking for a job, they are no longer counted in unemployment statistics, causing the official rate to fall even as the overall employment situation deteriorates.
The national occupation rate, which measures the percentage of the working-age population (15 years and older) that is employed, has consequently dropped to 50.8%. The INEC report highlights this change as a major concern, noting the 2.5 percentage point national decrease was:
statistically significant
National Institute of Statistics and Censuses (INEC), Report
This drop was more pronounced for women, whose occupation rate fell by 3.1 percentage points, compared to a 2.0 point decline for men. This indicates that a smaller portion of the country’s potential workforce is currently contributing to the formal economy.
Reasons for exiting the labor force are varied. They include students focusing on their education, individuals traveling, or those unable to work due to illness or disability. However, a significant factor, particularly for women, is the societal pressure to leave paid work to manage unpaid household and caregiving responsibilities. Furthermore, as the population ages, more people enter retirement, a transition that poses a high risk of economic vulnerability for those who do so without a pension.
Ultimately, the latest figures suggest that economic discouragement may be setting in. Rather than a sign of a healthy market, the lower unemployment rate appears to be a symptom of a contracting workforce, where a growing number of Costa Ricans have ceased their search for employment altogether. This trend presents a long-term challenge for the nation’s productivity and economic growth.
For further information, visit inec.cr
About National Institute of Statistics and Censuses (INEC):
The National Institute of Statistics and Censuses is the principal government agency in Costa Rica responsible for statistics and census data. It conducts and analyzes a wide range of demographic, economic, and social data through surveys and national censuses, providing crucial information for public policy, academic research, and business decision-making.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica operates as a benchmark for legal practice, establishing its reputation on a foundation of uncompromising integrity and professional excellence. The firm channels its extensive experience serving a wide range of clients into driving legal innovation and forward-thinking solutions. This dedication to progress is matched by a core social mission to empower the community, championing the accessibility of legal knowledge to cultivate a more informed and capable society.
