Norwegian business leaders and economic forecasters are split over whether the ill effects of low oil prices are now spreading nationwide. Some think the “oil crisis” is spilling over into many sectors of the economy, while others like Finance Minister Siv Jensen maintain there’s still no crisis at all.
Arguments continued over the weekend, after Norway’s main national employers’ organization NHO released its latest economic barometer report in newspaper VG and it quickly topped local newscasts. The report, based on a survey of leaders at 2,311 companies nationwide, indicated there’s an oil crisis indeed, and it’s now all but gushing into the Oslo area.
The business leaders were asked to describe the market outlook for the next 12 months. Their optimism last year at this time was replaced by much more pessimism. Fully 21 percent more leaders were negative than positive, and NHO concluded that rising unemployment resulting from the oil industry downturn in Western and Southern Norway is already seeping into the important and most populous areas in and around the capital.
“Oslo and Akershus are beginning to be as negative regarding market outlook as companies in Vestlandet (Western Norway, the traditional hub of the oil industry),” NHO President Tore Ulstein told VG.
Norwegian Broadcasting (NRK) quickly followed up with reports on how one large company based at Lysaker just west of Oslo, Technip, already has reduced local staffing by around 200. Other major companies like Aker Solutions have also announced hundreds of job cuts over the past year.
Its parent company Aker, however, ran a full-page ad in newspaper Dagens Næringsliv (DN) on Saturday actually looking for new employees, while government officials led by Finance Minister Siv Jensen, Prime Minister Erna Solberg and the head of Norway’s central bank continue to deny that Norway is in any economic crisis. The new leader of state welfare and employment agency NAV continues to claim that jobs can be found in many counties around the country, and that the counties of Agder, Rogaland and Hordaland continue to be among the few with significant increases in unemployment rates. If workers laid off in those areas’ once-booming oil and offshore industry are willing to relocate, NAV boss Sigrun Vågeng still believes that most can find work.
Last week, one of the oil industry’s most high-profile forecasters and consultants, Jarand Rystad, predicted oil prices will jump back up to levels over USD 100 a barrel and he’s chided oil companies for cutting back too much in recent months. He worries they won’t be able to quickly rebound when the market picks up, and NRK reported that NHO’s own report indicated that markets will improve in 2018. It’s only the the next two years that will be tough.
‘Don’t be too pessimistic’
Harald Magnus Andreassen, chief economist at Swedbank in Oslo, told newspaper Aftenposten that several factors point in the opposite direction of NHO’s gloomy market outlook report. Andreassen warned against being “too pessimistic,” and said that he doesn’t see any clear signs that investment cuts in the oil sector will hit Oslo and Eastern Norway hard.
“We have not seen that the staffing cuts in oil-related businesses, which also have occurred in Oslo, have had large consequences for (overall) employment,” Andreassen told Aftenposten. “If the cutbacks influence business in the Oslo area, we would have felt it by now.”
He agreed that the cutbacks in the oil sector are “large,” but added that “we should remember that investment cuts in Norwegian business were even larger during the finance crisis in 2008-2010 than what we’re seeing now. And then we also saw more savings and reductions in consumption among the public, and we don’t see that now either.”
Pay talks and tax cuts
NHO’s negative market outlook report was released just days before the employers’ organization starts annual wage and benefits negotiations with its national counterpart, the large trade union confederation LO. NHO leaders representing the organization’s employers have already warned of little if any real pay hikes this year.
Pay talks start Tuesday with NHO’s industrial employers’ group Norsk Industri meeting the LO federation representing many industrial workers Fellesforbundet. Their talks can set the framework for others scheduled during the annual spring negotiating season, and NHO is keen on lowering expectations for any pay hikes.
Finance Minister Jensen is also advocating a “moderate” wage and benefits settlement and she called once again over the weekend for more tax cuts to stimulate the economy. “We have seldom had a better reason to cut taxes and fees in Norway,” Jensen claimed in a fiery speech that drew applause at her conservative Progress Party’s national board meeting at Gardemoen on Sunday.
“Now both sides (in the labour talks) are working towards moderation and we will work towards lower taxes,” Jensen told her fellow party officials. “That’s good, then things will function.”
Tough state budget negotiations loom
Jensen made it clear, though, that the government’s own negotiations over next year’s state budget, which also begin this week, will be demanding in light of tougher economic times. “We must secure purchasing power in the Norwegian economy,” Jensen said, “therefore it’s important with tax cuts,” both for individuals and companies.
Again, others disagree, including the minority government’s support parties in Parliament. Knut Røed, economist at the Frischsenter, claimed that tax cuts were “the last thing the Norwegian economy needs now. The only way they might work, he argued, is if they’re channeled directly towards lower-income Norwegians who “would actually spend the extra money they’d save.” Tax cuts granted to people who already have a strong household economy won’t change their behaviour much, he said, calling Jensen’s tax plan “short-sighted.”