– It is a development we have seen in the last year, where economic growth has decreased, and in some countries is even negative.
That’s what Professor of Economic History at the Norwegian School of Economics, Ola Honningdal Grytten, says.
Despite historically low unemployment, and high speed in the economy, Norges Bank announced at the interest rate meeting last week that they now had several indicators of a turnaround in the economy.
That may seem to be taking full effect now.
On Tuesday, several Norwegian companies announced the reduction of hundreds of employees in order to save costs.
FALL IN DEMAND: – If enough people downsize, purchasing power could fall due to increased unemployment, then even more people could lose their jobs, says Ola Honningdal Grytten. Photo: Tor Henning Flaatten / TV 2
More downsizing now
The telecommunications giant Telenor announced that the company will get rid of 200 employees, and Postnord announced a cut of 265 man-years.
At the same time, the media company Schibsted, which owns VG, Aftenposten and Finn.no, among others, announced that they will cut half a billion in costs over the next two years. Schibsted wrote in a press release that no large-scale downsizing is currently planned, but the company cannot guarantee that the cuts will not affect the employees.
– Redundancies and increased unemployment have been announced for some time and I’m basically amazed that it hasn’t happened sooner, says Grytten.
MEDIAHUS: Kristin Skogen Lund, CEO of Schibsted, had to announce on Tuesday that the company will cut costs sharply in the next couple of years. Photo: Photo: Rune Blekken
The latest updated figures from Nav show that unemployment was 1.6 per cent in December. Both Norges Bank and the government have assumed in their forecasts for 2023 that unemployment will rise somewhat.
But economists TV 2 spoke to in December warned that unemployment could be higher than expected.
– When unemployment first increases, it doesn’t just increase a little, then it typically increases quite sharply, said Olav Chen in Storebrand.
Others may follow suit
Grytten also believes there could be a danger of a “domino effect” among the companies. That if some companies start downsizing, others may follow suit.
– If enough people downsize, purchasing power could fall due to increased unemployment, then even more people could lose their jobs, says Grytten and adds:
– In addition, it cannot be ruled out that others will follow suit in downsizing because they fear that their production will become too expensive in competition with others who are downsizing.
Also in the USA and other parts of the world, several companies have initiated major downsizing processes. Google has announced that they will lay off 12,000 employees, the streaming service Spotify will cut six percent of its workforce and the online shopping giant Amazon will get rid of 17,000 employees.
The economics professor believes that the severe layoffs in the US are due to high costs and interest rates, and eventually falling demand as a result of that.
– In the USA you are quick to save labor costs, in Norway you are far more reluctant to make people redundant, says Grytten.
LO fears the continuation
– We are very worried about that. In a way, we have been waiting for this to start happening, but we haven’t seen much of it in the numbers yet, says LO’s chief economist, Roger Bjørnstad.
INTEREST RATE SHOCK: The chief economist at LO has several times criticized Norges Bank’s sharp interest rate hikes. Photo: Sveinung Kyte / TV 2
Bjørnstad believes that the sharp tightening of household finances, increased electricity costs for business and the sharp rise in interest rates indicate that unemployment will rise.
– I think there are completely real market assessments and a drop in demand behind it, says Bjørnstad.
The chief economist has several times taken the floor that Norges Bank’s sharp interest rate hikes are too aggressive and unnecessary.
– Have Norges Bank and the authorities underestimated how much unemployment can rise?
– Yes, personally I think they have underestimated it. So I respect that making forecasts is a risky sport, says Bjørnstad.
Exposed industries
Grytten believes that there are some industries that are more exposed than others in a situation where, among other things, electricity prices are high, and interest rates have risen a lot.
– Typical construction, as well as ICT companies (information and communication technology companies) and tourism, as well as parts of the retail trade that do not sell essential products, says Grytten about particularly vulnerable industries.
All over the world, economists have warned that we may be heading into a recession, i.e. a severe economic downturn, due to, among other things, sky-high inflation.
– For some countries we may see a recession, but Norway is less exposed to it than many others, since the energy sector is large and energy prices are high, Grytten believes.
