Cyprus’ labour market tightened further in Q3 2025, with the unemployment rate easing slightly to 4.1% from 4.5% a year earlier.
Importantly, the improvement was not driven by shrinking labour supply: the labour force expanded to 530 thousand from 516 thousand, while employment rose to 484 thousand from 472 thousand.
Participation was broadly unchanged at 65.6% (65.7% in Q3 2024), yet the employment rate increased to 81.6% from 80.7%, consistent with conditions near full employment. Participation and employment rates are also nearing their pre-crisis highs, reinforcing the tight-market signal. Job openings remained elevated, with vacancies slightly easing to 15 thousand (from 16 thousand), while the vacancy rate fell to 3.0% from 3.5% largely because the market expanded (higher labour force and employment), rather than due to a material weakening in labour demand.
Overall, the unemployment-rate trajectory points to a steady post-COVID and geopolitical-shock normalisation, and reinforces the view that slack is now limited. We expect the unemployment rate to settle at 4.4% in 2025 (from 4.9% in 2024) and ease to 4.2% in 2026.
With employment approaching a plateau, sustaining growth will increasingly depend on productivity and investment rather than additional hiring over the coming quarters.
Capacity constraints are becoming more visible: labour shortages are reported most prominently in Tourism, Trade, ICT and Arts, while demand for new jobs remains above its long-term average. In this environment, non-Cypriot labour is a structural pillar of supply; in 2025 the workforce split is 73% Cypriots, 11% EU nationals and 16% non-EU nationals, underscoring both the economy’s reliance on cross-border labour and the importance of effective integration and skills matching.
Policy and business priorities therefore converge on three levers: faster productivity gains via digitalisation, innovation and better resource allocation; capital deepening through higher investment to raise output per worker; and measures that expand effective labour supply, including targeted upskilling, improved matching and—where appropriate—well-managed labour inflows.
*Konstantinos Vrachimis, Manager, Economic Research, Eurobank Limited
