Sri Lanka’s unemployment rate rose to 4% in the second quarter of 2026, as the number of people entering the labour force exceeded the economy’s capacity to absorb them, despite an increase in employment and job creation.
According to the latest Quarterly Labour Force Survey released by the Department of Census and Statistics, the unemployment rate increased from 3.8% in the second quarter of 2025 and 3.7% in the first quarter of 2026. However, it remained below the 4.3% recorded in the third quarter of 2025.
The number of unemployed people was estimated at 340,240.
The increase in unemployment came despite overall employment growth. The number of employed people rose by 73,578, or 0.9%, compared with the same period last year, reaching 8.25 million. Employment also increased by 143,348, or 1.8%, compared with the first quarter of 2026.
The labour force participation rate, which measures the share of the population aged 15 and above that is employed or seeking employment, increased from 49.3% a year earlier to 50%. This was higher than the annual rates recorded between 2021 and 2025. The total labour force stood at 8.59 million.
The industrial sector was the main contributor to employment growth. Employment in manufacturing, construction, mining and public utility services increased by 9.3% year-on-year to 2.25 million.
As a result, the industrial sector’s share of total employment increased to 27.3%, the highest level recorded in reports published by the Department of Census and Statistics since 2020.
Employment in the services sector also increased by 1.4% to 4.06 million. In contrast, agricultural employment declined by 173,568, or 8.2%, to 1.93 million.
Women accounted for the entire net increase in employment. Female employment rose by 127,991, or 4.7%, to 2.85 million, while male employment declined by 54,414, or 1%, to 5.39 million.
Female labour force participation increased from 31.7% to 32.7%. However, the female unemployment rate remained significantly higher at 6.1%, compared with 2.8% among men.
Women also accounted for 72.8% of the 8.58 million people outside the labour force.
The year-on-year increase in the overall unemployment rate was driven primarily by men. Male labour force participation increased from 69.5% to 70.3%, while the male unemployment rate rose from 2.6% to 2.8%.
