A new analysis of Norway’s job market warns that as many as 200,000 full-time jobs may disappear over the next five years because of the current downturn in the oil industry. As Norway’s central bank pondered cutting interest rates yet again this week, to boost economic activity, at least one economist maintained that the country still isn’t facing a crisis.
The magazine Teknisk ukeblad reported this week that the analysis firms Menon and DNV GL had produced a study concluding that at least 100,000 jobs will have disappeared by 2020. Many already have, given the job cuts announced since oil prices plummeted last year.
The report, commissioned by oil industry association OG21, characterizes the 100,000 job losses as a “conservative estimate,” though. That’s because the analyis only took into account full-time equivalent jobs (årsverk) within the oil industry itself.
“We haven’t taken into consideration jobs in other branches,” Ida Amble Ruge, project leader at Menon, told Teknisk ukeblad. “This (the 100,000 figure) is a gross number for the oil industry.”
Feeling the chill
The International Research Institute of Stavanger, where much of Norway’s oil industry is based, has estimated that 330,000 jobs are tied to petroleum operations in Norway. In addition, though, many other industries from metals and construction to hotels and restaurants are indirectly tied to fortunes of the oil industry. When oil industry workers lose their jobs, and oil and offshore companies cut back, the chill can be felt far beyond the oil sector itself.
Around 25,000 people have already lost jobs, Ruge noted, with state welfare agency NAV bracing for an increase in the ranks of the unemployed next year. Cutbacks among international oil companies are also being felt on Norway’s offshore fields, not just those announced by Norway’s own Statoil, which also reported a 57 percent decline in third-quarter profits last week. That’s due to lead to more cuts in investments and postponed projects.
Still reason for optimism
Kjetil Olsen, the new chief economist at the Norwegian operations of Nordic bank Nordea, nonetheless notes that the Norwegian economy has managed “surprisingly well” despite the drama in the oil industry. Olsen has experience as an analyst himself at the country’s central bank (Norges Bank) and sees reason for optimism.
“We see that growth has slowed, but unemployment is steady in many parts of the country,” Olsen told newspaper Dagens Næringsliv (DN). He also pointed to growth in many sectors aided by low interest rates and a much weaker Norwegian currency, the krone. Norway’s seafood industry is selling like never before, with one salmon producer telling DN that he “thanked God” for the lower oil prices that have weakened the krone and made his fish much more competitively price in the export market. With the exception of hotels that have catered to oil industry, Norway’s tourism industry is also doing well, since the weak krone makes it more competitive as well.
“There’s no crisis in Norway,” Olsen claimed. He believes low interest rates, the weak krone and the government’s “moderately expansive financial policy” offset the downturn in the oil sector.
The board of Norway’s central bank cut its prime lending rate to just 0.75 percent in September and was meeting on Wednesday to discuss whether to announce another reduction on Thursday. Several analysts have advised against it, but Olsen and others expect another interest rate reduction at some point this winter, to help fend off the chill.