Decline in Unemployment Rate Does Not Mean the Labour Market is Improving
Economist Yusuf Rendy from the Center of Reform on Economics (CORE) Indonesia stated that the decline in Indonesia’s open unemployment rate (TPT) to 4.68% does not necessarily indicate an improvement in labour market conditions. According to him, this drop instead hides a paradox amid widespread layoffs (PHK) in various industrial sectors.
The Central Statistics Agency (BPS) recorded a 0.08 percentage point decrease in the TPT in February 2026 compared to the same period the previous year. Yusuf described this figure as too slim to be interpreted as a significant improvement in the labour market.
“Layoffs are still occurring in various sectors, from textiles and electronics to media and mining. So there is indeed a paradox that needs to be explained,” Yusuf said when contacted on Thursday, 7 May 2026.
He explained that the main issue lies in the TPT measurement method used by BPS. Under BPS’s methodology, a person is considered employed if they have at least one hour of work activity in the past week.
As a result, workers who have recently been laid off but occasionally drive online taxis, engage in small-scale trading, or help with family businesses are still recorded as employed. “However, in terms of income and economic stability, their conditions could be far worse than when they had formal employment,” Yusuf stated.
According to him, the TPT only measures the presence or absence of work, not the quality of the job a person has. This indicator fails to capture shifts from formal to informal employment, reductions from steady to daily income, or changes from full-time to part-time work.
Furthermore, Yusuf assessed that the current direction of Indonesia’s labour market shows signs of informalisation. The growth in informal workers is occurring faster than that of formal workers.
At the same time, the agricultural sector has once again become the largest absorber of labour amid the weakening of the manufacturing industry. “This is not a signal of a healthy economic transformation, but a sign that many workers are surviving in low-productivity sectors because formal job opportunities are limited,” he said.
The industrial situation, Yusuf continued, also does not yet support optimism. Manufacturing activity remains under pressure, as evidenced by the Purchasing Managers’ Index (PMI) for manufacturing that has been in contraction territory. Many companies are still implementing efficiencies and holding back on recruiting new workers.
In this situation, Yusuf views the TPT decline as more reflective of the informal sector’s ability to absorb economic pressures rather than the creation of truly strong, decent jobs.
Therefore, he urged the government not to focus solely on the open unemployment rate. According to him, other indicators such as underemployment, the proportion of informal workers, real wages, and manufacturing conditions are far more important for reading the health of the national labour market.
“The main problem in Indonesia’s labour market today is not just about the presence or absence of jobs, but the declining quality of jobs,” Yusuf stated.
Previously, BPS recorded that the total working-age population in February 2026 was 219.54 million people, an annual increase of 2.753 million people. This consists of 64.63 million people not in the labour force, an annual increase of 891,000 people, and 154.91 million in the labour force, an annual increase of 1.862 million people.
Of the total labour force, 147.67 million are employed, an annual increase of 1.896 million people. Meanwhile, the unemployment portion is 7.24 million people in February 2026, a decrease of 0.035 million people annually.