Endorsed by investors as havens of stability while those around them tottered, the neighboring Nordic states both weathered the financial crisis that struck in 2008 better than the single currency region and have grown faster since. But their labor markets have followed divergent scripts.
Swedish unemployment rose to 8.0 percent in January from 7.1 percent in December, data showed on Wednesday, reflecting a large export-dependent manufacturing sector and trade flows that show 60 percent of foreign sales going to Europe.
Meanwhile Norway’s oil-dependent economy continued to create jobs as high oil prices fuel an investment boom, pushing the unemployment rate in the three months to January down to 3.3 percent from 3.4 percent in October-December - a third of the average level in the euro zone.
“These labor markets are very different for one big reason: oil,” said Erik Bruce, a senior economist at Nordea Markets. “Norway is very dependent on oil investment and capital goods for the North Sea, and if oil prices are high, manufacturing is resilient.”
With Brent crude soaring over $120 per barrel recently, Norway’s consumers also feel more insulated from Europe’s debt woes and continue to spend on everything from
consumer goods to real estate. That is expected to push mainland gross domestic product
growth - excluding the lucrative oil and shipping sectors - to 2.7 percent this year, one of the highest rates in Europe.
Jobless rates in Denmark, the third Scandinavian country, have steered of a middle course, holding broadly steady at 4 percent in December, data late last month showed - or at just over 6 percent for gross unemployment, which includes those on public job training programs.
Denmark’s export sector is also large, but around 20 percent of its foreign sales go to the euro zone’s standout economy Germany and 14 percent to Sweden, which expanded rapidly over
most of the last two years. But Sweden has started to struggle.
Exports have slowed while falling house prices are squeezing households, contributing to an expected 1 percentage point fall in fourth quarter GDP.
The Nordic region’s biggest economy remains in good fiscal condition, but it is expected to barely grow this year as the continent teeters on the verge of recession.
“The labor market will continue to deteriorate, we have some leading information on layoffs, vacancies have dropped and the PMI (business survey) is weak,” said Michael Grahn a senior
economist at Danske Markets. “We expect it to peak at close to 9 percent late this year or early next year, quite a jump from a recent low (of 6.6 percent in August).”
The strong Swedish and Norwegian crowns are also weighing on the two economies. But in this respect Norway has an advantage too. Its oil sector is heavily dependent on the dollar so the
Norwegian crown’s strength relative to the euro affects only a thin segment of its manufacturing base. Norway’s broader economy is also more resilient, being less dependent on the traditional industries that dominate in Sweden.
