Layoffs remain a major concern in various parts of the world, including Indonesia. Since the onset of the Covid-19 pandemic, this troubling trend has shown no signs of subsiding.

As 2025 began, several companies once again announced massive job cuts. Around 3 million workers in the textile industry are facing the threat of unemployment, and 70% of hotel and restaurant owners in Jakarta have stated they are planning to implement layoffs.

Nailul Huda, the Director of Digital Economy at the Center of Economics and Law Studies (Celios), explained that this situation is influenced by declining consumer purchasing power and weakened market demand. When demand decreases, it inevitably affects production levels.

“A decline in demand for manufactured goods has led to reduced production,” Nailul told CNBC Indonesia recently.

According to data from S&P, Indonesia’s Purchasing Managers’ Index (PMI) has dropped sharply. From a reading of 52.4 in March 2025, it fell below 50 to 46.7 in April and slightly increased to 47.4 in May.

Nailul explained that a PMI figure below 50 signals deterioration in the manufacturing sector’s performance, as it indicates no expansion is taking place. This can occur when the domestic market does not generate sufficient demand for increased production.

“A foreseeable consequence is that manufacturing sector utilization will continue to fall. In the case of textiles and textile products, utilization rates could drop to below 50%,” he stated.

He further added that this could trigger a significant rise in layoffs, with an estimated 1.2 million workers potentially affected. The primary reasons behind this are the U.S. trade tariff war and the ongoing weak domestic demand due to low consumer purchasing power.

“First, the trade conflict with the U.S. is reducing global demand, including for Indonesian products. This leads to a decline in domestic production and raises the risk of layoffs,” Nailul said.

“Second, domestic demand remains weak because people’s purchasing power, especially in the lower and middle-income brackets, has not yet recovered,” he added.

AI’s Role in Layoffs

The rapid advancement of artificial intelligence (AI) is believed by some to have implications for jobs that rely heavily on human labor. There is growing concern that this technology may replace human roles and result in job losses.

When asked whether mass layoffs in Indonesia are also driven by AI, Nailul acknowledged there is an impact, though it is still relatively limited and mostly felt in service sectors such as finance.

“There is indeed an influence from AI and technological use on layoff trends, but in my view, the effect is not yet significant. It’s more likely to affect service industries like financial services,” he explained.

Nailul also pointed out that no job is completely safe from the wave of layoffs. Likewise, no particular skill guarantees immunity from job cuts.

Even the technology sector has been impacted by the layoff wave. Tech skills, once regarded as the most in-demand, have not escaped job cuts either.

“I don’t think there’s any specific skill that must be possessed. This layoff wave can strike in any sector. Even technological skills—once believed to be highly sought after—have not been spared from layoffs in several digital companies,” Nailul concluded.