Indonesia’s labor market showed modest improvement in August 2025, with unemployment declining by over 4,000 individuals year-on-year. While the overall rate fell to 4.85%, structural challenges persist—especially among youth and vocational school graduates. The data underscores the need for targeted employment strategies that address demographic and educational disparities.
Key Facts & Background
- Total unemployed in August 2025: 7.46 million people, down by 4,092 from August 2024.
- Open Unemployment Rate (TPT): 4.85%, a decrease from 4.91% in August 2024.
- Urban unemployment rate: 5.75%; rural: 3.47%.
- Both declined year-on-year: urban by 0.04 pp, rural by 0.20 pp.
- Gender breakdown:
- Male TPT: 4.85%
- Female TPT: 4.84%
- Both saw declines: male by 0.05 pp, female by 0.08 pp.
- Youth unemployment (ages 15–24): 16.89%, the highest among all age groups.
- Elderly unemployment (60+ years): 1.71%, the lowest, but slightly increased by 0.22 pp.
- By education level:
- SMK graduates: 8.63% (highest TPT)
- SD or below: 2.30% (lowest TPT)
- Other levels:
- SMA: 6.88%
- SMP: 3.80%
- Diploma I–III: 4.31%
- Diploma IV/S1–S3: 5.39%
- Unemployment distribution:
- SMA graduates make up 30.74% of total unemployed
- Diploma I–III graduates account for only 1.96%.:
Strategic Insights
Indonesia’s declining unemployment rate in August 2025 reflects gradual labor market recovery, supported by economic growth and rising formal employment. However, the persistence of high unemployment among youth and vocational school graduates reveals deeper structural mismatches between education output and labor market demand.
The sharp contrast between urban and rural unemployment rates suggests that urban labor markets remain more competitive and saturated, while rural areas may benefit from informal or agricultural employment buffers. This urban-rural divide calls for region-specific employment policies, including urban job creation and rural entrepreneurship support.
The vulnerability of young workers (16.89% TPT) is a long-standing issue. Despite being more educated and digitally literate, many face barriers to entry-level jobs, such as lack of experience, limited industry linkage, and slow absorption by formal sectors. Addressing this requires expanded vocational training, apprenticeship programs, and youth-targeted incentives for employers.
The consistently high unemployment among SMK graduates (8.63%) is particularly concerning. Vocational education is designed to be job-ready, yet the data suggests misalignment between curriculum and industry needs. Strengthening industry partnerships, updating training modules, and certification reform could improve employability and reduce dropout-to-unemployment pathways.
Meanwhile, the rise in formal employment share to 42.20% indicates improving job quality, but the pace remains slow. Enhancing labor protections, social security coverage, and skills upgrading will be essential to sustain this trend and reduce underemployment.