Increased unemployment expected in 1999

Download article in original language : NO9812115NNO.DOC

Reports by several important financial institutions, made public in December 1998, predict a turning point in the labour market situation in Norway. Unemployment is expected to rise from the autumn of 1999 onwards.

Autumn 1998 was marked by a widespread concern about economic developments in Norway. There are several factors contributing to this uncertainty, particularly the effects of 1999 state Budget (NO9811100N) and the extent to which Norway is affected by low oil prices, high interests rates and a weakened national currency. The unemployment rate in Norway has remained low in recent years, but the latest economic prognoses indicate a reversal of trends in the national labour market. The Bank of Norway, Statistics Norway (Statistisk Sentralbyrå, SSB) and the Directorate of Labour all issued reports in December 1998, in which unemployment forecasts have been adjusted compared with earlier estimates. The three institutions expect that the changed economic situation will lead to increased unemployment from autumn 1999 onwards. There is uncertainty, however, as to the extent of this reversal of trends, and the time of its occurrence.

In its inflation report for the fourth quarter of 1998, which was issued on 16 December, the Bank of Norway readjusted its unemployment estimates for 1999. While a decrease in unemployment was originally expected from 1998 to 1999, the new estimates predict a slight increase in unemployment from 3.25% in 1998 to 3.5% in 1999 (unemployment figures as estimated by the survey method). A greater increase is expected, however, throughout 1999, which will be reflected in estimates for 2000 and 2001. The Bank of Norway emphasises that potential measures to improve employment must be directed at improvements in the pay determination system and in the functioning of the labour market. The Bank also stressed that the labour market parties could make a significant contribution to reducing the costs of readjustment in the labour market by agreeing a moderate pay settlement for 1999.

The Directorate of Labour also predicts an increase in unemployment for 1999. Its latest figures (December 1998) show a continued fall in unemployment in Norway during 1998. The directorate points out, however, that the demand for labour is no longer on the increase. On average, 2.4% of the labour force were registered as unemployed during 1998. The Directorate predicts a 2.7% level of unemployment in 1999, but this increase is not likely to take effect until the second half of the year.

Of the three institutions, Statistics Norway has produced the highest unemployment estimates for 1999. It believes that unemployment may increase from 3.2% in 1998 to 4.0% in 1999 and 4.2% in 2000 (survey-based figures).

In the state Budget, which was published in October 1998, the government forecast a continued reduction in unemployment for 1999, and predicted that this level would remain stable for some years. The government has so far chosen not to readjust its estimates in the light of recent estimates from the three institutions.