Unemployment has more than halved since the end of March, but the Norwegian Labour and Welfare Administration (NAV) expects that it will take more than two years before unemployment returns to pre-crisis levels.
The new forecast is based on NAV’s information about the situation nationally and internationally up to and including October 30.
“It is extra difficult to make forecasts when the situation is so uncertain. The infection situation and any introduced measures are of great importance for the development of the labor market.
“Therefore, there is also great uncertainty associated with this forecast,” NAV director Hans Christian Holte noted.
He added that a sharp tightening of infection control measures might lead to a lower labor market development.
Unemployment at 3.3% next year
NAV expects an average of 95,000 completely unemployed people next year. The number is expected to fall to 86,000 in 2022.
That corresponds to a registered unemployment rate of 3.3 and 3.0% of the labor force, respectively.
In comparison, there was an average of 63,400 completely unemployed people in 2019, which is 2.3% of the labor force.
“The labor market is doing better now, but it will take time before we are back where we were before the pandemic.
“The improvement will continue, but at a slower pace. We, therefore, expect that unemployment will be higher at the end of 2022 than before the corona crisis,” Holte said.
He pointed out that some industries, such as the aviation and hotel industry, as well as oil-related industries, will probably struggle for several years to come.
Expecting increased private consumption
The Norwegian economy is doing better now than in April, and NAV expects the recovery to continue for the next two years.
An expansive fiscal policy has helped curb the downturn in the Norwegian economy, and many households have saved some money during the pandemic.
“We, therefore, expect private consumption to pick up over the next two years, and that this will be the most important contribution to growth in the Norwegian economy over the next two years,” Holte said.
Low interest rates and growth in house prices will contribute to the construction of more homes and thus create an increased need for labor.
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