Poverty and unemployment increased in 2008, as the economy slowed and incomes failed to keep up with inflation.

The percentage of households below the poverty line increased to 17.7 percent in July from 16.7 percent the previous year, according to a study released yesterday by the National Statistics and Census Institute (INEC).

The study, based on queries of nearly 15,000 households nationwide, shows that about 95,000 more people are below the poverty line in 2008 than last year.

Unemployment also increased to 4.9 percent from 4.6 percent, and extreme poverty increased to 3.5 percent from 3.3 percent. Still, poverty and unemployment were at their second-lowest point since 1995.

A household was labeled as “extremely poor” if its income was less than $56 per person per month, the cost of about 42 basic food products. A household was “poor” if its income was less than $122 per person per month, the cost of the food basket plus such necessities as housing, clothing, education and health care.

Víctor Hugo Céspedes, vice president of INEC's board, said he had expected poverty rates to be higher in response to a mere 3.3 percent growth in GDP expected for 2008.

But strong growth in income and employment in 2007 provided a cushion to soften this year's bad economic news.

Still, poverty and unemployment may increase further once this cushion wears down, he said.

The size of the employed workforce grew 1.7 percent in a 12-month period ending in July, down from 5.2 percent the previous year. And real income grew 1.7 percent in the year ending July 2008, down from 14.1 percent the previous year.

Meanwhile, growth in the hotel, restaurant and financial sectors shrank and construction stagnated. The trend could be evidence that the global financial crisis began hitting Costa Rica as early as July, Céspedes said.