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How to read Costa Rica’s unemployment figures

From the print edition

Costa Rica’s economy, starting to slow from a solid first semester of gross domestic product growth at 4-5 percent, has seen unemployment numbers increase in the same period. 

Gathered by surveys requiring interviews, employment figures  are a lagging indicator.

The latest unemployment results for the first quarter of 2012 come from the Continuous Employment Poll, conducted by the Costa Rican government’s National Statistics and Census Institute. Despite Costa Rica’s accelerating GDP growth since the third quarter of 2011, unemployment is up from 9.6 percent in the first quarter of 2011 to 10.4 percent in the same period of 2012. 

Adding to the unexpected results, a National Households Poll – for which latest available data is July 2011 – put unemployment at that time at 7.7 percent.

How is it that polls can have apparently significantly different employment results for the same period, and that unemployment is measured as increasing when the economy is expanding at a good pace? 

Employment is one of those slippery economic statistics that is easily misunderstood. As economists have gone out of their way to point out in recent articles in the daily La Nación, the base against which unemployment is measured is not the number of working-age persons in the economy, but the number of people looking for work. 

Take a college student who also drives a taxi to make money. He is counted as employed. If this cab driver gets fired, tries to find another taxi job but can’t, and so continues as a full-time student, he is classified as not looking for work, and is eliminated from the unemployment rolls, even though his decision not to work was not his own. 

Since polls are interview-based and taken with different methods, results can vary. The older National Households Poll is taken sporadically by people hired one poll at a time, while the newer Continuous Employment Poll is ongoing by permanent government staff. This difference would seem to favor the continuous poll, which gives a higher unemployment rate, as more accurate. 

But while a 2.7 percent difference (7.7 percent to 10.4 percent halfway through 2011) may seem significant, the fact that most polls have margins of error of about 3 percent means that technically neither poll contradicts the other; their difference is within a normal statistical margin of error.

So, with different but compatible results between two polls, why is unemployment in Costa Rica increasing after what has been a yearlong good economic run? 

There are two reasons: First, perversely, good times give more people hope of finding a job, so they enter the statistical base of those looking for work.

The second reason for the increase in measured national unemployment isn’t a matter of arbitrary employment-poll classifications, but is quite real. Costa Rica’s economy is changing rapidly as it expands, and agriculture is hardest hit, down to less than 10 percent of GDP output, and one-sixth of exports. 

A generation ago, agriculture was the bulwark of employment and exports. Today, manufacturing and services dominate GDP output (over 90 percent). These two sectors are high-tech, require English and have trouble meeting demand for workers. 

Meanwhile, workers displaced from traditional jobs don’t have the skills for new ones.

The great equalizer is construction, which went through a 19-month contraction through August 2011 and is now coming back, slowly but surely, as the engine for high numbers of unskilled jobs. 

A jobs fair held July 20-21 at San Pedro Mall in eastern San José was illustrative of new jobs profiles for Costa Rica. José Pablo Formal, president of fair organizers Nushark Media, said the event was his company’s elite-level employment event. Of a total of 17 companies, 16 were employers and one was an English-language company. Among the employers, all but one required English, and several were also looking for information-technology skills. 

Formal said he is planning two more job fairs this year: a mid-level event for big companies looking for college-aged workers who don’t necessarily speak English (for which he expects to sign up 45 companies) and a job fair for small- and medium-sized companies (for which he expects 60 employers). 

The numbers of companies in each type where an agricultural, construction or unskilled manufacturing background would help qualify a job seeker is zero for the high-end companies, a minority for big, non-English-requirement companies, and likely a majority for small- and medium-sized companies. 

In Costa Rica, increased expectations of the possibility of finding work, which spur more people to look for jobs, plus skill requirements which most do not meet, are the reason employment surveys show increasing unemployment in a growing economy.


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