November 8, 2023
JAKARTA – A resilient economy has led to a reduction in the unemployment rate despite weakening domestic and overseas demand this year.
Statistics Indonesia (BPS) reported on Monday that the country’s unemployment rate dropped to 5.32 percent in August, a 0.54 percent decrease from the same month last year. The number of unemployed amounted to 7.86 million people.
Acting BPS head Amalia Adininggar Widyasanti said although the figures were better than last year, the labor market had not returned to the pre-pandemic level.
“Although [unemployment] continues to decline, the number and level of unemployment are still relatively higher than the conditions before the pandemic,” she said. In August 2019, she said, the number of unemployed people was 7.1 million.
Indonesia has experienced solid economic growth this year, although it slowed in the third quarter at 4.94 percent year on year (yoy).
Economists have expected the country’s economy to slow down this year due to weakening global demand, falling commodity prices and a series of interest rate hikes.
S&P’s purchasing managers’ index (PMI) for Indonesia’s manufacturing sector dropped from 52.3 in September to 51.5 in October, marking the lowest level since May.
The figure suggests that factory activity was still expanding last month, albeit at a slower pace than before. Readings above 50 signify growth, while those below that threshold point to a drop in production.
S&P Global economics associate director Jingyi Pan explained that “further signs of slowdown in growth momentum have manifested, including a second successive slowdown in new order growth and a fresh contraction in new export orders.”
Bank Indonesia unexpectedly increased its benchmark interest rates by 25 basis points (bps) on the back of global uncertainties and to defend the rupiah against the strong United States dollar. The central bank decided to increase the rate despite the fact that inflation in the country has been on a declining trend for most of the year.
Amalia said about 147.71 million out of 271 million population are part of the labor force. She said that the labor force participation rate (TPAK) in August 2023 reached 69.48 percent, the highest since records began in 1986.
Compared with August 2022, the increase in the TPAK was more pronounced among females, at 54.52 percent, indicating a 1.11 percent increase. In contrast, the male TPAK stood at 84.26 percent, which saw a smaller increase of 0.39 percent.
Male unemployment stood at 5.42 percent, showing a decrease of 0.5 percent. Meanwhile, female unemployment was down by 0.6 percent to 5.15 percent, in line with the increased TPAK that reflected a more pronounced decline in female unemployment.
Amalia added that unemployment decreased in urban areas but increased in rural areas. In terms of formal and informal work status, out of the 139.85 million working individuals, 37.68 percent were laborers, employees, or workers, followed by 23.03 percent in self-employment and 14.15 percent in businesses assisted by non-permanent labor.
The number of formal workers increased by 0.2 percent compared with the previous year, primarily due to the increase in workers with employee or worker status.
She concluded by noting that the three business sectors with the highest number of workers were agriculture, trade and the processing industry, while the sectors that created most jobs were hospitality, including accommodation, food and beverages, construction and agriculture.