– Is Norwegian workers so much smarter than Swedish workers?
Handelsbanken’s chief economist in Norway, Knut Anton Mork, asked the unpleasant question at a seminar at the Finance Ministry in early December.
The question is uncomfortable because hourly labor costs in Norwegian industry is 25 percent higher than in Sweden. If Norway is to maintain the difference in the long run, the Norwegian workers produce correspondingly more pr. hour. Or put another way: We must do things a lot smarter than Swedes.
Morks hypothesis is that additional payment with oil money from oil companies to mainland enterprises has driven up Norwegian salary more than is possible to maintain. But that time is now over, wage increases must come down and tax revenues may come to fail.
Starting year of change
2015 may be the start of big changes in the Norwegian economy. The mainland economy will resemble increasingly on the economy in other countries, where it does not look good.
The last 10-15 years have a combination of rising oil prices stabilized above $ 100 per. barrel, greatly increasing oil investments and increasingly cheap imports from China provided an unprecedented economic upturn. The financial crisis was mild with Norway.
– We are trying to put behind us a 15-year golden age in the Norwegian economy. Now oil brake with lower oil prices and a marked decrease in demand from oil companies. As such, in 2015 the start of a new era in the Norwegian economy, says chief economist Øystein Dørum in brokerage DNB Markets.
Unrest in 2015
At the end of 2014 it happened a lot in the Norwegian economy pointing into an uneasy 2015:
- Oil prices were at their lowest almost halved since the summer.
- Norges Bank surprised the vast Most of cutting the policy rate.
- krone fell by 11-12 percent during the four weeks until the middle of Advent.
All forecasts indicate that 30 billion in demand being away for years because oil investment will decline. There are more than 1 percent of total production in mainland Norway. Suppliers to the oil report job losses.
Will not say “crisis”
Meanwhile rejects Governor Øystein Olsen to use the word “crisis”.
– There is no reason to be very pessimistic on behalf of people, he said to Aftenposten after he had cut interest rates on December 11.
He looks quite fancy the new year.
– The Norwegian economy is, and has been robust. We are like that seen well equipped to meet the changes that are needed, said Olsen.
But both Olsen and Dørum predicts lower wage
– If time with increasingly higher oil prices is over, so we think, so will wage growth in Norway increasingly have to be in line with the countries we compete against. One of the most striking features of 2015 is that growth in real wages will be only 0.5 percent. It is the lowest growth in 20 years, says Dørum.
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Housing prices in the first 11 months of last year averaged just 2 percent higher than in the same period in 2013. Economists and agencies believe inflation also in 2015.
Roger Bjørnstad, chief economist at the Economic Analysis, believes housing in year average is 3.4 percent more expensive than in 2014. He justifies it with clean cut before Christmas and a new expected rate cuts this year.
– Despite interest rate reduction due to more negative outlook for the Norwegian economy and an expected decline in consumption, think I save money will find its way to the housing market. Many see this as an investment, not consumption expenditure, he said.
Inflation will benefit all housing types to good, he believes, but turn out geographically different.
– Rogaland, had strong rise for years, will mark the decline in oil prices also in the housing market. Housebuilding in Oslo has been limited, and inflation here will rub off on commuter areas in Akershus, Buskerud and even parts of Østfold and Vestfold, says Bjørnstad.
Nordea predicted a sharp fall in house prices for 2014 and an overall decline of 15-20 percent by the end of 2015. Now they think of an average growth of 4.5 percent in 2015.
– While banks in 2013 was very reluctant to give loans, so we reverse development year. The main reason that prices will continue to rise in 2015 is that banks will still be more lending willingness, and that there may be further rate cuts. We can see that mortgage rates will be one percent lower than at the beginning of 2014, says chief analyst Erik Bruce at Nordea Markets.
Oil Fall, people’s uncertainty and rising unemployment could dampen inflation, says Bruce. Forecasts from DNB Markets suggests a careful inflation of 2.1 percent in 2015, before they believe in a fall in house prices of 2.5 per cent in 2016.
Real Estate Agency Property Norway think of 4-6 percent inflation in 2015.
Both Norges Bank and Statistics Norway (SSB) predicts that wage inflation and inflation higher this year. In sum means that the purchasing power rises much less this year than it has done in recent years.
The two predicts a growth in purchasing power at 0.5-0.75 percent this year, calculated before tax relief. If this be the outcome, may 2015 be wage earners worst year in 20 years. Even in the worst financial crisis years growth in purchasing power better than this.
– Higher unemployment will slow wage growth. Weaker dollar last year and this year will make imports more expensive. Together with higher prices for electricity will contribute to markedly higher inflation this year. Lower wage growth and higher inflation means weak growth in purchasing power this year, says researcher Torbjørn Eika in SSB.
The Ministry of Finance estimates that an average salary in whole position was hardly 525.000 million last year. If the tax takes about a third of wage inflation, this means in real terms only a few thousand patches extra year with a salary of average. One completed and one expecting rate cuts can add or subtract a thousand patches, depending if you have loans or money in the bank.
The salary goes to consumption or savings. SSB predicts that households this year will increase saving rate their, as they have done in recent years. It helps that growth in total private consumption this year may be the lowest since the crisis year of 2009.
In SSB estimates are almost the only population growth which helps to boost private consumption. That means each of us on average expected to spend about as much this year as last year. Norges Bank is more optimistic about growth in consumption this year.
The sharp fall in oil prices reduce oil investments which will increase unemployment in the economy. But predictions says that the increase is very small this year. Norges Bank, SSB and brokerage DNB Markets predicts that unemployment is in the range 3,75- 4 percent as an average for the year.
The latest figures for unemployment for October 2014 and is 3 , 8 percent or 103,000 people. An increase of 4 percent means 5000-6000 several vacant. This is predictions for unemployment measured by SSB method. It also includes unemployed who do not have the register itself with Labour and Welfare Administration Nav.
The uncertainty related to the number who will choose education instead of jobs in poorer times, number of migrant workers who leave home and to what extent they who loses oil jobs get new jobs. Many employers – in both the private and the public – longs to acquire vacant oil engineers.
DNB Markets presented new forecasts about a week before Christmas. They estimate 3.9 percent unemployment this year.
– As with central bank we do not believe in crisis Norwegian economy this year. We are waiting albeit halved momentum this year compared with 2014 and that the number of jobs will not increase. But the increase in unemployment is muted because it comes fewer new into the labor market in worse times, says chief economist Øystein Dørum.
The fall in oil investments are the driving force behind the increased unemployment. After many years of continuous growth tells forecasts of a fall of around 15 percent this year.
Read or listen forecasts for the Norwegian economy here:
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