The Effect of Inflation and Economic Growth on the Unemployment Rate in Indonesia for the 2016-2025 Period

Abstract

This study aims to analyse the effect of inflation and economic growth on the unemployment rate in Indonesia during the 2020–2024 period. The research employs a quantitative approach using multiple linear regression analysis to examine the partial and simultaneous effects of inflation and economic growth on unemployment. The results show that inflation has a positive but statistically insignificant effect on the unemployment rate, with a significance value of 0.274. Meanwhile, economic growth has a negative and significant effect on unemployment, indicated by a significance value of 0.004, suggesting that increased economic activity contributes to reducing unemployment. Simultaneously, inflation and economic growth significantly affect unemployment, with the model explaining 71.8% of the variation in unemployment. The findings support Okun’s Law but indicate that the classical Phillips Curve relationship is not fully supported during the research period, which was influenced by the COVID-19 pandemic and economic recovery process.