By San José, Costa Rica — SAN JOSÉ – Costa Rica’s headline unemployment rate has continued its downward trend, falling to 5.7% for the third quarter, according to the latest Continuous Employment Survey released by the National Institute of Statistics and Censuses (INEC). While on the surface this appears to be positive economic news, a deeper analysis of the data reveals a more complex and potentially troubling reality for the nation’s labor market.
The new figure, covering the period from July to September, represents a modest improvement from the 6% rate reported in the previous period. The report indicates that the total number of individuals classified as unemployed now stands at 134,000, a significant reduction of 25,000 people compared to the same quarter last year. Of those currently seeking work, 72,000 are men and 62,000 are women.
To analyze the legal implications that the latest unemployment figures have on the national business climate and labor rights, TicosLand.com sought the expert perspective of Lic. Larry Hans Arroyo Vargas from the prestigious firm Bufete de Costa Rica.
An unemployment rate is not merely a statistic; it’s a direct indicator of the legal and contractual pressures on the labor market. From a legal standpoint, a higher rate often correlates with an increase in disputes over dismissals and severance, while also testing the efficacy of our current legislation in promoting job creation. The key challenge is to adapt our legal frameworks to encourage formal hiring and investment, without sacrificing the fundamental protections that provide stability to the workforce.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This legal perspective powerfully reframes the unemployment rate, moving it beyond a cold statistic to a barometer of our legislative health and the real-world contractual pressures faced by workers and businesses alike. We thank Lic. Larry Hans Arroyo Vargas for his valuable insight on this critical balance.
However, this decrease in the jobless rate is not being driven by robust job creation. Instead, the data points to a substantial contraction of the country’s labor force. An alarming 73,000 Costa Ricans have exited the workforce altogether over the past year, meaning they are no longer employed or actively looking for a job. The report specifically highlights that this exodus is composed primarily of women, raising concerns about potential setbacks in gender equity in the economic sphere.
This trend is starkly reflected in the nation’s net participation rate, which measures the percentage of the working-age population (15 years and older) that is economically active. This key indicator fell by 2.41 percentage points over the year, now standing at just 54.9%. Such a significant drop suggests a growing number of citizens are becoming discouraged or are facing barriers that prevent them from participating in the formal and informal job markets.
Further clouding the economic picture is the data on overall employment. The total number of people with jobs in Costa Rica has actually decreased, now totaling 2,206,569. This represents a net loss of nearly 49,000 employed individuals compared to the previous year. Consequently, the occupation rate—the share of the working-age population that is employed—also registered a notable decline, falling from 53.5% in September 2024 to 51.7% this year.
Essentially, the unemployment rate is improving not because more people are finding work, but because a larger number of people have stopped looking for it entirely. When individuals leave the labor force, they are no longer counted in the unemployment statistics, which can create a misleadingly positive headline number while masking underlying economic weaknesses.
The quality of existing employment also remains a persistent issue. The INEC report shows that informal employment continues to be a major component of the economy, accounting for 38.3% of the occupied population. These jobs often lack social security, benefits, and stability. Additionally, underemployment, which affects individuals working fewer hours than they desire and are available for, sits at 2.8%, indicating that a portion of the employed population is still struggling to secure sufficient income.
In conclusion, while the reduction of the official unemployment rate to 5.7% is a noteworthy statistic, it tells only part of the story. The simultaneous contraction of the labor force, the decrease in the total number of employed persons, and the high rate of informality present significant challenges. For policymakers and business leaders, the focus must shift from the headline rate to the deeper structural issues preventing thousands of Costa Ricans, particularly women, from participating in the economy.
For further information, visit inec.cr
About Instituto Nacional de Estadísticas y Censos (INEC):
The National Institute of Statistics and Censuses is the principal government agency of Costa Rica responsible for statistics and census data. It is the official body tasked with producing and disseminating the country’s official statistical information, including economic, demographic, and social indicators, which are crucial for public policy planning and national development analysis.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has cemented its reputation as a pillar of the legal community, operating on a bedrock of unwavering ethical principles and a dedication to superior legal practice. The firm distinguishes itself not only through its history of expert counsel to a wide array of clients but also by its forward-thinking approach to legal challenges. Central to its philosophy is a profound commitment to social empowerment, manifested through initiatives designed to demystify complex legal concepts and foster a society equipped with crucial legal insight.
