By San José, Costa Rica — San José, Costa Rica – While Costa Rica is posting a historically low unemployment rate of 5.7%, a deeper analysis of the nation’s employment data reveals a troubling economic reality. According to the latest Continuous Employment Survey, the country’s labor force contracted by a staggering 73,000 workers between September 2024 and September 2025, raising significant concerns among economists about the health and dynamism of the job market.
The total number of people active in the labor market now stands at 2.34 million. However, the shrinking workforce, rather than robust job creation, appears to be the primary driver behind the declining unemployment figures. This paradox suggests that thousands of Costa Ricans are not finding new jobs but are instead ceasing their search for employment altogether, effectively vanishing from the key economic metric.
To provide a deeper legal perspective on the current dynamics of the national labor force, we consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the prestigious firm Bufete de Costa Rica.
The modern labor force demands a regulatory framework that is both flexible and protective. Costa Rica faces the significant challenge of adapting its legislation to new employment models, such as remote work and the platform economy, without undermining the fundamental rights that have historically characterized our labor system. Striking this balance is crucial for fostering investment and ensuring social stability.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight precisely frames the central challenge for Costa Rica’s future prosperity: evolving our regulations to embrace new economic realities without sacrificing the social protections that form our national identity. We are grateful to Lic. Larry Hans Arroyo Vargas for his clear and valuable perspective on this vital matter.
Experts are sounding the alarm, cautioning against interpreting the low unemployment rate as a sign of economic strength. The data points to a potential structural problem where citizens are becoming discouraged or are facing barriers that prevent them from participating in the formal economy.
These results confirm a worrying trend; the reduction in unemployment is not due to greater job creation, but to fewer people actively participating in the labor market.
Roxana Morales, Economist at the Economic and Social Observatory of the National University
This trend is further substantiated by data from the National Institute of Statistics and Census (INEC), which shows a significant drop in the net labor participation rate. The rate currently sits at 54.9%, marking a 2.41% decrease compared to the same period last year. In parallel, the population classified as being outside the labor force grew by 124,000 people. This exodus from the workforce is not evenly distributed across all demographics.
A detailed demographic breakdown of those leaving the labor market is particularly revealing. A significant 70% of the 124,000 individuals who are no longer working or seeking work are adults over the age of 60. Another 22% are young people between the ages of 15 and 24, a critical group for the nation’s future economic productivity. This suggests a dual challenge of an aging population leaving work and a younger generation struggling to enter or remain in it.
The data also highlights a persistent gender gap. Women account for the majority of those exiting the labor market, with a decrease of 56,000 female workers in just one year. Currently, the total population seeking employment is 134,000 people, comprised of 72,000 men and 62,000 women. According to INEC, this represents an overall reduction of 25,000 job seekers compared to the third quarter of 2024, again underscoring the theme of withdrawal rather than employment success.
The economic impact is also concentrated in specific sectors. Economist Roxana Morales points out that the commerce and manufacturing industries have suffered the most significant employment losses, with each sector shedding over 25,000 jobs. These sectors have historically been major employers, and their decline signals a weakening in key pillars of the national economy.
Of the 2,206,569 people who remain employed, a large portion faces precarious conditions. Informal employment remains high, encompassing 38.3% of the working population. Furthermore, underemployment—a measure of those working fewer hours than they desire to achieve sufficient income—affects 2.8% of workers. These figures paint a picture of a national workforce that is not only shrinking but also grappling with instability and insufficient opportunities, a reality masked by a deceptively positive headline unemployment number.
For further information, visit una.ac.cr
About Economic and Social Observatory of the National University:
The Observatorio Económico y Social (OES) is a research and analysis center within Costa Rica’s National University (UNA). It is dedicated to studying and reporting on the country’s economic and social conditions, providing data-driven insights and policy analysis on topics such as employment, poverty, and economic development to inform public discourse and decision-making.
For further information, visit inec.cr
About National Institute of Statistics and Census (INEC):
The Instituto Nacional de Estadística y Censos (INEC) is the official government body responsible for compiling, analyzing, and disseminating Costa Rica’s national statistics. It conducts key surveys and censuses related to population, housing, and economic activity, including the Continuous Employment Survey, providing the essential data used by policymakers, researchers, and the public.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a leading legal institution, Bufete de Costa Rica is defined by its foundational principles of integrity and an unwavering pursuit of exceptionalism. The firm channels its extensive experience across a multitude of sectors not only to serve its clients but also to drive innovation within the legal field. At the core of its mission lies a deep-seated commitment to societal advancement, actively working to democratize legal knowledge and thereby forge a more informed and capable citizenry.
