Norway’s unemployment rate hit the highest level in at least two decades, raising questions about the economic health of western Europe’s biggest oil producer one day before the central bank meets to discuss interest rates.
A seasonally adjusted labor force survey showed the jobless rate reached 5 percent in July, up from 4.8 percent in June, Statistics Norway said on Wednesday. A Bloomberg survey of seven analysts had pointed to no change. The rate is the highest since the mid-1990s.
The report comes a day before Norway’s central bank is set to meet to discuss interest rates. A survey of economists conducted by Bloomberg shows the bank probably will keep its main rate at 0.5 percent.
The Labor Force Survey, which was revised in 2006 to comply with EU requirements, differs from the non-seasonally adjusted registered unemployment rate, which came in at a much lower 3.1 percent in August. One key reason for the difference in the two figures is that the survey also includes jobless people who haven’t registered at the Employment Office.
Halfdan Grangard, an analyst at Handelsbanken, said "employment levels have been flat throughout the year." One factor accounting for the divergence in the two unemployment estimates is that more young people are joining the labor force and that fired oil workers are getting severance packages.
Wednesday’s labor survey was published "after Norges Bank’s cut-off" ahead of Thursday’s meeting, Handelsbanken said.
Even so, Danske Bank says investors are currently underpricing the probability of a rate cut and from a risk-reward perspective this suggests being positioned for lower interbank rates going forward, according to a note from strategist Jostein Tvedt.