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Fast Comment NorwayUnemployment pushed higher by a recovering labour force participation rate

  1. LFS unemployment jumped to 3.6 pct in June
  2. Above expectations; we and consensus expected 3.4 pct
  3. The labour market is not particularly tight at the moment; policy rate to be kept unchanged
LFS unemployment jumped to 3.6 pct in June; above expectations
According to the Labour Force Survey (LFS), unemployment rose to 3.6 percent in June (three months of May-July), up from 3.4 percent in May. We and consensus had anticipated an unchanged reading of 3.4 percent. According to the details, employment rose by 9000 people in June, but the labour force rose by as much as 17000 people; pushing overall unemployment higher. As we have highlighted before, the labour force participation rate had been surprisingly low, and thus we expected it to pick up again; albeit, more gradually. The jump in June was larger than what we had envisaged, and thus it pushed the unemployment rate above expectations. In summary, the survey data continues to signal that the labour market is not particularly tight at the moment. These data are volatile and noisy, however, but registered unemployment – which is more important to Norges Bank’s assessment of the state of the economy, has also refrained from declining over the past few months; instead, it has levelled out over the past 3-4 months. Judging from these data, we see no urgency for Norges Bank to raise its policy rate any further. And needless to say, the global backdrop has darkened significantly since Norges Bank’s policy rate meeting in June, which led Norges Bank to choose a more careful tone at the intermediate meeting in August. Our base-case remains for the policy rate to stay unchanged at 1.25 percent for the foreseeable future.


Disclaimer

Marius Gonsholt Hov

Senior Economist

Norway

maho60@handelsbanken.no

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