Indonesia's open unemployment rate fell to 4.75% in August, which the Jakarta Globe described as the lowest since the Covid-19 pandemic, but the number of people working short hours and looking for more work rose by about 1.24 million to 12.84 million, according to official labor data released by Statistics Indonesia, known as BPS.

That second number is the one economists are now pointing to. The rise in underemployment came close to matching the 1.44 million increase in total employment over the same 12 months, which suggests much of the new work created in Southeast Asia's largest economy offers fewer hours than workers want. For investors in Indonesian consumer stocks, retailers and lenders to small borrowers, hours and income matter as much as the headline jobless count, because they set how much households can spend.

Fewer jobless, more part-time

BPS counted 7.38 million unemployed people in August, about 77,000 fewer than a year earlier, giving an open unemployment rate of 4.75% against 4.85% in August 2025. Moh. Edy Mahmud, a BPS deputy, presented the figures at a press conference in Jakarta on Nov. 5, InvestorTrust reported.

The labor force grew to 155.37 million, and employment rose to 147.99 million. Of those working, 99.85 million, or 67.47%, put in 35 hours or more a week. Another 35.29 million, or 23.85%, were part-time workers, and 12.84 million, or 8.68%, were classed as underemployed.

BPS defines underemployed workers as people working fewer than 35 hours a week who are still looking for, or willing to take, more work. The underemployment rate rose from 7.91% a year earlier, when 11.60 million people were in that group, the Jakarta Globe reported on Nov. 11.

The definition of a job is broad. BPS counts anyone who worked at least one hour in the reference week as employed, in line with International Labour Organization definitions. That is one reason the agency reports underemployment separately, and it is the point critics have seized on.

Nailul Huda, director of digital economy at the Center of Economic and Law Studies (Celios), told the Jakarta Globe that the fall in unemployment was "a misleading measure of success." He argued that rising underemployment and informal work showed many Indonesians lack enough hours and income, and he questioned the one-hour threshold.

Informal work keeps its grip

The informal sector, which covers many self-employed people and casual laborers, accounted for 57.93% of employment in August, up from 57.80% a year earlier. Formal jobs still grew in absolute terms: formal workers rose by about 410,000 to 62.25 million, but their share slipped to 42.07% from 42.20%.

Three sectors employ close to 60% of the workforce. Agriculture accounted for 28.20% of jobs, wholesale and retail trade for 17.86% and manufacturing for 13.75%, according to the BPS figures reported by both outlets.

Labor force participation eased to 70.33% from 70.59%, the Jakarta Globe reported.

Compared with three months earlier, the picture is less flattering. BPS put the unemployment rate at 4.65% in May 2026. The number of unemployed rose by about 160,000 between May and August, which BPS partly attributed to fresh graduates entering the job market and seasonal shifts in farming, according to the Jakarta Globe.

Why the data matter for policy

The labor figures came out in the same week as third-quarter output data, which showed the economy grew 5.47% in the third quarter, helped by government spending, and the government has been adding targeted support for household consumption into the year end.

Measured over five years, the improvement in the headline rate is large: open unemployment has fallen from 6.49% in August 2021 to 4.75%, the Jakarta Globe noted. The composition is the open question for policymakers. A labor market where nearly six in 10 workers are informal and almost one in 11 of the employed wants more hours leaves household income exposed to any slowdown in farming, trade or small manufacturing, the three sectors that hold most jobs.

The 12.84 million underemployed now outnumber the 7.38 million officially unemployed by about 5.5 million, a gap that widened by roughly 1.3 million over the year.