Norway's unemployment rate soars to above 10% due to coronavirus, highest since 1930s

by Reuters
Tuesday, 24 March 2020 14:26 GMT

* Unemployment rate surges to 10.9% from 2.3% in Feb

* Retailers, tourism worst hit

* Many layoffs expected to be temporary

* Companies took advantage of emergency cut in notice period (Adds detail, background)

By Terje Solsvik

OSLO, March 24 (Reuters) - Norway's unemployment rate soared five-fold this month to above 10%, its highest level since the 1930s, as companies announced mass layoffs and shutdowns amid efforts to combat the coronavirus outbreak, data showed on Tuesday.

Tens of thousands of job cuts have been announced every day, although many of the layoffs are expected to be temporary and resulted from companies taking advantage of an emergency scheme to cut the mandatory redundancy notice period to just two days from two weeks.

The country's Labour and Welfare Agency (NAV) said registered unemployment had risen to 10.9% as of Tuesday, up from 5.3% a week ago and from just 2.3% at the end of February.

Private-sector activity outside of the oil industry is expected to contract by between 15% and 20% in the near term, the government predicted on Friday.

"The development of the last two weeks is without comparison," NAV chief Sigrun Vaageng said in a statement.

Norway has confirmed 2,566 people infected with the coronavirus, of whom 12 have died.

The Norwegian parliament has approved loans, tax deferments and extra spending of up to 280 billion Norwegian crowns ($25.25 billion) to alleviate the impact of the crisis, while the central bank slashed its benchmark interest rate twice, from 1.5% to a record low 0.25%.

The government will pick up the bulk of the tab for redundancy payments, and has also introduced more generous unemployment benefits than usual.

Budget carrier Norwegian Air has said it would temporarily suspend 90% of its global workforce, while Swedish retailer H&M last week said up to 2,000 of its staff in Norway were at risk of temporary lay-offs. Companies providing services to the oil industry have also laid off staff after being hit by the slump in oil prices.

"We believe the number of unemployed will continue to rise as strict social-distancing measures limit economic activity," Handelsbanken Capital Markets wrote in a note to clients.

The increase was particularly large at the start of last week however, with numbers easing a bit in the following days, which could suggest the future rise will be more incremental, Handelsbanken added.

Though the government expects the economy to rebound sharply, limiting the 2020 contraction in non-oil gross domestic product to a 1% fall, brokers DNB Markets said the outcomes may range from a drop of 0.3% to a precipitous 4% plunge.

The employees most affected in the last week were sales and retail workers, with unemployment up 151%, while tourism and transport had seen the biggest jump over the last two weeks combined, NAV said.

Norway's post-World War Two unemployment rate previously peaked at 5.5% for the full year in 1993, while the peak for any single month stood at around 6%, according to the Confederation of Norwegian Enterprise (NHO), a business lobby group.

Data on unemployment during the Great Depression in the early 1930s remains incomplete, but academic work in recent decades has suggested a peak of 10-12% for the overall workforce in Norway.

($1 = 11.0896 Norwegian crowns) (Editing by Gwladys Fouche and Susan Fenton)

Our Standards: The Thomson Reuters Trust Principles.