Future unemployment development still hard to predict

New ways of fighting the economic consequences have been developed very rapidly. Most importantly, the state has temporarily taken on the costs which businesses or individuals would normally have had to deal with. Sweden has been estimated to spend 240 billion kronor (€22.7bn) of public money on emergency measures.

The recently established furlough scheme is the most costly, at around 95 billion kronor (€9bn). 

“If we look back to the last crisis in 2008-2009, no such measure was introduced and Sweden lost many industry jobs forever,” said Minister for Finance Magdalena Andersson on 14 May.

As she said this, the furlough scheme comprised 420,000 people, and 22 billion kronor (€2bn) had already been paid out.

Furloughing means that employers can cut workers’ hours while the state covers the loss of earnings so that people make nearly what they used to. All the Nordic countries have introduced similar support.

The Swedish Ministry for Finance has calculated how much the crisis measures cost as a percentage of GDP in the four largest Nordic countries plus Germany and the Netherlands.

Source: Swedish government. The diagram shows support with a direct effect on the budget, and includes direct support, furlough costs, reduced employers' fees and costs related to sick pay.

There are great differences between Denmark and Finland – according to these figures, the Danish measures cost nearly 3.5 times more. But it is too early to see what the final cost will be by the end of the year. In Denmark, the “temporary furlough scheme” will be gradually phased out and ends on 29 August.

In order to judge how the Nordic labour markets are managing, you need to look at more than unemployment figures. Using comparable economic statistics, like the OECD’s, the latest figures available are, however, from March. 

But these unemployment figures can be used as a basis to show the starting point before countries imposed lockdown. Figures were below the OECD average in Denmark, Iceland and Norway, and slightly above in Finland and Sweden:

The graph shows seasonally adjusted unemployment in OECD countries during Q1 2020. The Nordic countries and the OECD average are marked in separate colours. Source: OECD.

This is how things have developed in the Nordic countries since the 2008 financial crisis:

The black line is the OECD average and reflects the fact that unemployment in the USA increased in March by 15.9 million newly unemployed people.

When the Corona pandemic hit, none of the Nordic countries, except for Norway, had yet reached the pre-financial crisis level of low unemployment. 

To assess how the Nordic labour markets have developed you need two figures – how many are unemployed judged by traditional criteria and how many workers have been furloughed. 

Two countries, Iceland and Norway, have collated such statistics. These are relatively comparable:

Unemployment April 2020

We cannot find any similar statistics for the other countries. But they probably also end up some way north of 10% when some of the people on furlough schemes are added to the normal unemployment figures. 

420,000 people were registered as furloughed on 14 May. In Denmark, the “temporary wage compensation measure” has been crucial to 200,000 Danish workers. 

Finnish statistics show 217,000 Finns were unemployed in April, which is 8.1%. This is slightly less than one year ago. The number of “hidden unemployed” has increased by 81%, however, and counts 196,000 people. These are people who should be able to apply for work but who for various reasons do not. The increase from last year is 88,000 people.

There is reason to believe that the number of Nordic workers who are benefiting from the extraordinary Corona measures will fall sharply when societies gradually go back to normal. Yet many companies – especially in the hospitality and tourism industry – will not survive. The traditional unemployment figures will probably begin to grow until they reach post-2008 financial crisis levels.