Unemployment in Norway expected to rise this year and next

A period of record-low unemployment may be about to end, and a rise in jobseekers in Norway is expected in the coming months, according to recent figures and analysis.

Pictured is a home office set up.
A laptop, schedule and cup of coffee on a work desk. Photo by Nick Morrison on Unsplash

Unemployment in Norway rose slightly in February, up 0.1 percent from January, the latest figures from Statistics Norway show.

In February, there were 105,000 unemployed people in Norway, an increase of 10,000 compared to the year before. The unemployment rate in Norway is currently 3.6 percent.

Additionally, the number of available jobs in Norway shrunk by 4,500. Still, Statistics Norway writes in its report that unemployment is still well below the 15-year average.

Meanwhile, the Norwegian Labour and Welfare Administration (NAV), which records its own unemployment figures, expects the number of those without a job to rise.

“The fact that costs are increasing is and will continue to be noticeable to both companies and most people. We, therefore, expect that the demand for labour will decrease somewhat and that unemployment will continue to increase somewhat,” Director of Employment and Welfare at NAV Hans Christian Holte said.

The good news is that while unemployment will rise, it will be quite moderate. NAV’s own unemployment rate is currently at 1.8 percent. Over the next year, it expects the number of those completely out of work to increase to 2.1 percent.

“Although unemployment will increase somewhat, there will still be low unemployment in Norway this year and until next year. We, therefore, expect that the Norwegian economy and the labour market will recover well through the encounter with high inflation and increased interest rates,” Holte said.

NAV said that those who work in industries where employment is affected by the economic cycle, like construction, IT and engineering, would see the most significant increases in unemployment.

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Why Norway is now unlikely to cut interest rates before 2025

In a change from earlier plans, Norway's central bank announced Thursday that it was unlikely to cut interest rates before 2025.

Why Norway is now unlikely to cut interest rates before 2025

The current key policy rate of 4.5 percent will likely remain unchanged for the rest of the year, Norges Bank announced on Thursday.

“If things go as we now believe, the key interest rate will remain at 4.5 percent for the rest of the year, before it is gradually reduced,” Ida Wolden Bache, governor of the central bank, said.

The key policy rate was last raised at the end of last year and was the 14th interest rate increase since the autumn of 2021.

When the central bank last presented its forecast and expectations for the key policy rates in March, it said it would lower rates during the second half of the year – most likely in September.

Therefore, consumers in Norway can no longer expect their loan or mortgage repayments to become cheaper in 2024. In recent months, many economists had predicted the central bank would delay implementing cuts until the end of 2024.

One of Norway’s largest banks, DNB, and the country’s national data agency, Statistics Norway, forecast interest rate cuts to arrive in December.

The bank had been using cuts to prevent the economy from overheating and curb inflation. While inflation has fallen slightly below expectations, factors like high wage growth and a stronger-than-expected economy have influenced the bank’s decision.

“The committee’s assessment is that the interest rate is high enough to bring price growth down to the target within a reasonable time, but that there will be a need to keep the interest rate up somewhat longer than previously estimated,” the bank said in its explanation.

Chief economist at Sparebank 1 Gruppen, Elisabeth Holvik, told the Norwegian newswire NTB that the bank had also held off cutting interest rates to prevent the Norwegian krone from weakening any further.

Wolden Bache said that the weak krone had contributed to inflation.

“The devaluation of the krone that we have behind us still contributes to keeping price growth up,” she said.

The central bank’s governor also kept the door open to an interest rate increase if required.

Kyrre Knudsen, chief economist at Sparebank 1 SR-Bank, told NRK that the positive is that once the bank implements cuts, interest cuts will be made up to 2027.

“There were probably some who had feared that there could be talk of a somewhat higher interest rate. It is positive news that they are signalling a good number of interest rate cuts, both next year and up to 2027,” he said.

He also said that a stronger krone exchange rate could bring cuts forward.

“If the krone exchange rate strengthens a lot in the future, Norges Bank will also be able to come up with earlier interest rate cuts than what they are currently envisioning,” he said.