Norway’s Unemployment Surprise Cements September Rate Hike Case

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Norway’s unemployment fell more than expected, cementing the case for Norges Bank to begin post-crisis interest rate hikes later this month.

The seasonally-adjusted registered jobless rate declined to 2.7% in August, compared with the median estimate of 2.9% in a Bloomberg survey of economists that was in line with the central bank’s expectation published in June.

Norges Bank is moving ahead of most of the rich world in unwinding the crisis policies triggered by the pandemic as it prepares for a series of quarterly interest-rate increases from zero. It is expected to announce the first on Sept. 23. While unemployment trailed its forecasts for most of this year, labor market activity is now accelerating.

“If Norges Bank even had the slightest doubt whether to hike in September or not, today’s numbers speak loudly,” Swedbank economists said in a research report, adding the data is “perhaps the best sign that the recovery is well underway.”

Job vacancies rose by a seasonally-adjusted 20,900 last quarter to 93,200, the biggest increase since at least 2010, the statistics office said on Thursday. 

Signs of a mismatch in the labor market are emerging, which could lead to higher wage growth, Nordea, the region’s largest lender, said in its new outlook this week. 

“The upshot is that the momentum remains stronger than assumed by Norges Bank,” Handelsbanken’s economist Marius Gonsholt Hov said in a research report. “We are confident that Norges Bank will hike its policy rate not only in September, but also December.”
 

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