Finnish Unemployment Jumps as Government Debates Austerity

Finland’s unemployment surged to a nine-month high last month as the government coalition meets to discuss further austerity measures in the northernmost euro member.

The jobless rate, excluding seasonal variations, rose to

9.1 percent in February from 8.7 percent a year earlier, Helsinki-based Statistics Finland said on its website. Two economists estimated a rate of 8.7 percent and one estimated 8.4 percent, according to a Bloomberg survey.

“In reality, the labor market is weaker than the official figure suggests,” Juhana Brotherus, an economist at Danske Bank A/S in Helsinki, said in an e-mailed note. “The unemployment rate has only risen slightly because the number of hidden unemployed has risen to a record.”

Finland’s economy has contracted in three of the past five years. The country has struggled with falling exports, weak domestic demand and a slump in its papermaking and technology industries. The crisis stemming from Russia’s annexation of Crimea is now adding to the pain and hurting exports, 10 percent of which are sold to the eastern neighbor, Bank of Finland Governor Erkki Liikanen said yesterday.

Finland’s gross domestic product shrank 0.3 percent in the three months through December and has failed to grow for seven consecutive quarters.

No Relief

The government is meeting today to discuss measures that can boost short-term growth while also debating more austerity measures to halt a build-up in debt. The government has pushed through more than 5.5 billion euros ($7.6 billion) in austerity measures since 2011. Prime Minister Jyrki Katainen’s Cabinet has argued short-term pain is necessary to help debt levels from getting out of hand.

Policy makers are stopping companies from creating new jobs with a constant threat of new and higher taxes, according to Kari Stadigh, chief executive officer of Sampo Oyj, which owns If, the Nordic region’s biggest non-life insurer.

“Today, it’s too expensive to recruit people in Finland,” Stadigh said in a March 18 interview in Stockholm. “And you always have the risk of increased taxes. As long as there’s uncertainty that taxes could increase, it doesn’t build confidence.”

There were 26,000 fewer people at work in February than a year earlier and the number of people who dropped out of the work force rose by 25,000, the statistics office said.

Lagging Reaction

“We expect unemployment to grow” until the end of the first half, Brotherus said. “Labor markets react to an economic recovery with a lag, so there is no quick relief in sight.”

Structural industrial change has lowered the potential growth rate and hurt domestic demand in the nation with Europe’s fastest-aging population. Finland’s total factor productivity trend is seen about 17 percent lower by 2022 than what it could have been had its growth rate remained at the 2006 level, the European Commission said this month.

“The remedy is to promote ownership to take risks, to invest and hire new people,” Stadigh said. “You need more private sector jobs. That’s the only remedy or you have to cut the public sector significantly.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE