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Fast Comment NorwayPreview: Survey unemployment (LFS) in March

  1. LFS unemployment expected down to 3.7 pct in March, following 3.8 pct in February
  2. Labour market trends support NB's arguments for a rate hike in June
  3. Combined with a more expansionary fiscal stance, the likelihood of a third rate hike (2019) has increased
LFS unemployment expected down to 3.7 pct in March, following 3.8 pct in February
Next Thursday we will see figures for survey unemployment (LFS) in March, which we believe fell to 3.7 percent, down from 3.8 percent in February. The LFS employment figures so far this year have been weaker than indicated by both the contacts in Norges Bank’s Regional Network, as well as the hard employment data from the National Accounts. As shown in the chart below, however, the survey figures are highly volatile. The ‘true’ pace is probably closer to the actual outcome from the latest National Accounts, released a few days ago. As such, we believe the LFS employment data will show an upward correction in coming months, to a pace that mimics the growth signals from the Regional Network/National Accounts. More importantly, this pace is exceeding the growth rate of the labour supply now that the labour force participation rate has fully recovered from the cyclical drop seen during the oil crisis. Put together, this implies a further downtrend in unemployment ahead. We thus believe the LFS unemployment rate fell to 3.7 percent in March. The current labour market trends are more than solid enough for Norges Bank to stick to its plan of hiking the policy rate in June. The expectations for a June hike have gained further footing now that the Government has decided to increase revenue spending this year. On the margin, the fiscal stance is more expansionary than assumed by Norges Bank. In isolation, this also increases the likelihood of an additional rate hike during the second half of this year.


Disclaimer

Marius Gonsholt Hov

Senior Economist

Norway

maho60@handelsbanken.no

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