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.
Unemployment in Norway is likely to fall in the coming months. Pictured is a home office set up. 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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Historically weak krone to lead to higher interest rates

The weak krone against most major currencies means that Norway’s central bank will likely raise interest rates to 3.75 percent and beyond this year,

Historically weak krone to lead to higher interest rates

A struggling krone means it will take longer for inflation to fall in line with the two percent target set by Norges Bank, Statistics Norway (SSB) has forecast.

“The record weak krone exchange rate is putting parts of the economic policy in Norway to the test,” SSB researcher Thomas Von Brasch said of the krone.

“We estimate that the central bank will raise the interest rate by 0.25 percentage points in both June and September so that the peak interest rate will be 3.75 per cent in the autumn,” Brasch said.

Norges Bank has been using interest rates to try and control inflation in Norway. In May, prices were 6.7 percent higher than the same month a year before.

The cost of flights, food and rent were the main drivers of the inflation figures. Price growth on imported goods, caused by the weak, has also contributed to the increased prices in Norway.

Lower interest rates in Norway than elsewhere also drive a weak krone. 

Norway’s largest bank, DNB, expects interest rates to be even steeper. It expects Norges Bank to raise the key policy interest rate by 0.5 percent in June. This would bring the key policy rate to 3.75 percent.

A number of economists have said that the inflation figures released Friday were bad news for the central bank.

“Norges Bank has a bigger job to do than what they have assumed so far,” chief economist for Nordea Markets, Kjetil Olsen, told Norwegian business newspaper Dagens Næringsliv.

He also predicted an interest rate peak of more than four percent.