Post-Corona recovery more uneven than the crisis itself

Economic crises usually hit fast and wide, while recoveries and economic booms are more unevenly divided.  

This is easy to see in the OECD’s statistics for GDP in this year’s first quarter. Iceland and Ireland are at each end of the scale, for instance. Iceland’s GDP did worse than any other European country’s and had fallen 5.2%. Ireland has taken the lead among the countries that are on their way out of the economic crisis. The country saw solid GDP growth of 7.8% in Q1.  

The gap between Iceland and Ireland is 13 percentage points. Sweden and Finland are – just about – in the group of countries with GDP growth in Q1, while it has fallen in both Denmark and Norway.

The Nordic countries are marked red in the graph showing GDP development in the EU, Iceland, Norway and the UK in Q1 2021. Iceland saw the biggest fall while Ireland (to the right) saw the greatest GDP growth. Source: OECD.

A lot can have happened in the second quarter, however. Iceland has done badly because of its dependency on tourism, while Ireland has benefited from the fact that many multinationals have their European headquarters in the country. Companies like Google, Amazon and Facebook have done well during the crisis. 

But the OECD warns:

"Prospects for the world economy have brightened but this is no ordinary recovery. It is likely to remain uneven and dependent on the effectiveness of vaccination programmes and public health policies. Some countries are recovering much faster than others. Korea and the United States are reaching pre-pandemic per capita income levels after about 18 months. Much of Europe is expected to take nearly three years to recover."

If you look at the labour markets, the picture is somewhat different. Staying in the Nordics, Denmark has seen strong employment growth three months in a row. Unemployment was only 0.5%, or 14,000 people, higher than in February 2020 – the last month before the Corona crisis hit.  

Developments in Denmark are happily embraced by the Danish Minister of Employment Peter Hummelgaard:

“This once again confirms our expectations that companies are ready to welcome back workers in step with the gradual re-opening of society. This also shows that our choice to help companies so that they could maintain their workforce though furlough-schemes has paid off.”

Unemployment in percentage of the labour force over the past 17 months according to Eurostat. Norway reports quarterly figures and Denmark and Iceland are one month after Finland and Sweden. That is why these countries’ graphs are shorter. Source: labour force surveys from all the countries.

At 5% for Q1, Norway’s unemployment rate is one percentage point below Denmark’s and the lowest of the Nordics. For Q1 2020 it was 3.6%.

84,000 Norwegian jobs disappeared during the pandemic according to Statistics Norway. Since not all jobs are full-time, this corresponds to 62,000 fewer people in work in Q1 2021 compared to the same time last year. Nearly one in four of these jobs belonged to people working but not living permanently in Norway. 

Due to Norway’s strong pandemic immigration restrictions, foreign workers have lost their opportunity to work in the country. This is particularly true for the hospitality sector, where one in three jobs have disappeared. 

In Iceland, unemployment has continued to climb since the pandemic hit. But while the economy has struggled, the country has been very successful in fighting the Coronavirus. On 26 June all restrictions were lifted and 87% of the adult population have now had their first vaccine.

The Minister of Health Svandís Svavarsdóttir told a press conference this has been a unique decision. No other European country has been able to lift all restrictions like this. She praised Icelanders’ willingness to be vaccinated and for having followed restrictions that have severely limited their personal freedoms. 

Finland and Sweden already had higher unemployment figures than the rest of the Nordics before the pandemic.

If you look at the total unemployment figures for those aged 25 to 74 there is no major difference between the two countries. In February 2020, one month before the pandemic hit the two countries, unemployment stood at 6.6% in Finland and 7.6% in Sweden. The difference was one percentage point.  

The graph shows unemployment for the adult labour force in Finland and Sweden as well as that for people aged 15 to 24. Source: Eurostat. 

Later, unemployment rose in both countries. Finland reached its peak in August 2020 with 8.8% while Sweden peaked at 10% in March 2021. In May this year, unemployment in Finland stood at 7.8% and in Sweden it was 9.1%. The difference is still only 1.3 percentage points. 

Youth unemployment, defined by Eurostat as people aged 15 to 24, was 19.3% for Finland and 20.9% for Sweden in January 2020. The difference was 1.6 percentage points.

It then rose towards the end of that year to 22.1% in Finland before falling back to 15.7% in May 2021. In Sweden, however, youth unemployment continued rising to a peak of 27.4% in April and fell to 25.8% in May – making the gap to Finland a full 10.1 percentage points. 

Eurostat’s definition of youth (15 to 24) is often said not to fit the Swedish situation, where that age group is often in education. It is nevertheless interesting to explore why the figures differ so much for this group between Finland and Sweden.