Stability seen in Norwegian labor market

The Norwegian labor market has weakened due to the downturn in the oil sector; however, a flexible labor market in other sectors’ growth is absorbing some of the shock. Rise in unemployment is slower in 2016 than last year, while growth in employment seems to have rebounded again this year. The Norwegian Labor and Welfare Administration (NAV) and the Labor Force Survey (LFS), the two labor market data sources, have been describing a rather different scenario. There are several reasons for this; however, both are showing signs of labor market stabilization.

This is partially due to the main waves of redundancies in the oil sector that came from Easter through to late summer last year and the cutbacks being announced are quite smaller. Oil-related industries are likely to further downsize this year, albeit at slower rate, with the result that NAV unemployment peaks in the summer at about 3.5 percent, said Danske Bank in a research report.

Furthermore, the number of new vacancies that NAV published continues to increase. This suggests that labor demand outside the oil sector should be quite healthy. This affirms the view that growth outside the oil sector is rebounding rather than being adversely impacted by the downturn in oil. Either way, it implies that increase in unemployment is to certain degree exaggerating labor market weakness.