Costa Rica’s unemployment rate remains low by recent standards, but a closer look at the labor market shows fewer people participating in the workforce and fewer people employed than before the pandemic. At the same time, manufacturers say the strong colón is making it harder to protect jobs and justify new investment.
The latest figures from the National Institute of Statistics and Census (INEC), covering May through July 2026, put national unemployment at 6.7%. Labor force participation, however, stood at just 54.3%, meaning slightly more than half of Costa Ricans age 15 and older were either working or actively looking for work. INEC said the main labor indicators did not show statistically significant changes compared with the same period a year earlier.
That relatively low unemployment rate masks a longer-term problem. Costa Rica had 2,227,240 employed people in February 2020, shortly before the COVID-19 pandemic. By the quarter ending in June 2026, the figure stood at 2,182,916, according to the International Center for Economic Policy for Sustainable Development (CINPE) at the National University (UNA). That means the country had about 44,000 fewer employed people despite growth in the working-age population.
CINPE researchers point to the falling labor force participation rate as a major reason unemployment can decline without a comparable increase in employment. Participation has fallen from around 60% in 2022 to roughly 54% in 2026. The center warned that the decline in unemployment should be “interpreted with caution” because it has happened alongside a shrinking share of the population participating in the labor market.
A separate report published in June by UNA’s Economic and Social Observatory, or OES, reached a similar conclusion. Based on first-quarter comparisons, the study found that Costa Rica’s labor force had shrunk by 70,615 people from a year earlier and by 203,047 compared with the first quarter of 2020.
Women have been particularly affected as the number of women in the labor force fell by 141,534 between 2020 and 2026, compared with a decline of 61,513 men. The OES report also found that the number of employed people fell by 56,376 during the year ending in the first quarter of 2026, including 45,229 women and 11,147 men.
The latest INEC data do not show that the labor market is currently deteriorating sharply from one year to the next. They do, however, confirm that participation remains well below earlier levels, leaving Costa Rica with an unusually small labor force relative to its working-age population. Against that backdrop, businesses are increasingly raising another concern: the strength of the Costa Rican colón.
The colón has appreciated substantially against the U.S. dollar since 2022. OES calculated that the average monthly exchange rate fell by about 34% between June 2022 and May 2026, reaching roughly ₡454.4 per dollar. By mid-September, the reference rate remained near ₡450 to the dollar.
That creates particular problems for companies that earn revenue in dollars while paying wages, utilities and other expenses in colones. Each dollar of revenue converts into fewer colones, squeezing margins unless companies can raise prices, reduce costs or increase productivity.
The Costa Rican Chamber of Industries (CICR) found that 70.2% of companies surveyed this year considered the exchange rate a negative factor affecting competitiveness, making it the industry’s most frequently cited concern. The survey covered 115 formal industrial companies between April 9 and July 15.For some businesses, the pressure has already reached employment.
About 13.3% of the companies surveyed said they had reduced their workforce because of exchange-rate conditions. Among companies operating under Costa Rica’s Free Trade Zone Regime, the figure reached 23.1%. More companies said cuts could come if the exchange-rate situation continues. About 25.6% of respondents expected they would need to reduce staff in the short term, rising to 38.6% among free-trade zone companies.
Investment is also being affected as roughly 31% of manufacturers reported suspending expansion plans or new investments, while nearly half of the free-trade zone companies surveyed had put investments on hold. Six in 10 companies reported receiving fewer colones when converting dollar revenue, and 55% said their profitability had fallen.
