Rising unemployment piles up problems for Indonesian president

JAKARTA (Reuters) - Indonesian companies are shedding jobs as they
grapple with the weakest economic growth in six years, adding to the
troubles facing President Joko Widodo, who was elected last year on
pledges to dig the country out of a rut.

Government data might suggest no cause for alarm - unemployment was 5.81
percent in February, up only slightly from 5.70 percent a year earlier -
but the official numbers are notoriously unreliable and don"t adequately
cover the informal sector, which is two-thirds of Southeast Asia"s
biggest economy.

Recent reports of heavy lay-offs across the country paint a bleaker
picture, and business executives, recruitment firms and jobseekers say
it is getting worse.

Young people are being hit hardest; the International Labour
Organization estimated the youth jobless rate was more than 20 percent
in 2013, and economists believe it is higher now.

About a third of the workforce is aged 15 to 29, a youth bulge that
could bring Indonesia, a country of 250 million people, the sort of
demographic dividend China and South Korea enjoyed a generation ago -
but only if there are jobs for the 2 million people joining the
workforce every year.

"The government doesn"t have a blueprint for labor absorption," said
property businessman Hariyadi Sukamdani, chairman of the Indonesian
employers" association.

"If this condition is allowed to continue, what we would get is not a
demographic bonus, but a demographic disaster. There could be social
turmoil and higher crime rates."

JOBLESS IN JAKARTA

When he took office eight months ago, Widodo said he would pour billions
of dollars into infrastructure and foster growth in manufacturing.

But the promised splurge on roads, power plants and ports has not
materialized, largely because of bureaucratic hold-ups and land
disputes, and a shortage of skilled labor is holding back growth in
value-added industries.

Miners have been hammered by a double whammy: a ban on mineral ore
exports and a sharp drop in commodity prices.

Meanwhile, labor-intensive industries such as textiles and manufacturing
have been hit by the rupiah"s slide to a 17-year-low, which has raised
the cost of imported raw materials.

Hundreds of redundant garment factory workers protested for hours this
week in the financial district of Jakarta, the capital, after their
company was declared bankrupt and its assets seized by two banks.

Unemployment in turn is hitting consumption, which makes up more than
half of Indonesia"s economy. Automobile sales in May fell 18.4 percent
from a year earlier, the ninth decline in a row.

"Stocks are piling up because nobody is buying. The people"s purchasing
power is weak," said Ade Sudrajat, head of Indonesia"s textile
association. "This has never happened before in the last 45 years."

EXPAT EXIT

Arif Budimanta, adviser to the finance minister, said the government was
introducing measures such as halving lending rates for small businesses
and exempting most goods from a luxury tax to stimulate consumption.

At job fairs in Jakarta the gloom is palpable.

Naomi Octiva Naibaho, a manager at the Kompaskarier.com portal that ran
one such fair recently, said about 6,000 jobseekers turned up every day,
roughly triple the number of positions on offer.

Gita Harahap, 26, has been sending resumes for weeks since the bank
where she worked as a teller started a round of lay-offs, but she has
had no luck. "No one has called me back," she said. "The competition is
tighter."

In the first five months of this year, 79 companies approached
Universitas Indonesia for potential recruitment, down from 110 over the
same period of 2014, said Sandra Fikawati, head of the university"s
career development center.

The slowdown is also affecting higher-paid jobs, including in financial
services, said Rob Bryson, Indonesia country manager for recruitment
firm Robert Walters.

From mid-2013 to late last year, the number of foreigners holding work
permits in Indonesia is estimated to have dropped 20 percent to around
62,000, partly because expatriate jobseekers saw more opportunities in
Western countries, he said.

"Companies here are looking to increase productivity," Bryson said.
"They will happily hire one person and let go of two in many
circumstances, so that adds pressure to the employment scene."

(Additional reporting by Klara Virencia; Editing by John Chalmers and
Will Waterman)