Norway’s Lowest Jobless Rate Since 2008 Emboldens Rate-Hike View

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Norway's unemployment rate fell to a 13-year low, data that may justify continued interest-rate hikes to prevent the economy from overheating.

Unadjusted, joblessness declined to 2% in March, the Norwegian Labor and Welfare Administration said on Friday. That's the lowest since December 2008. When adjusted for seasonal factors, it fell to 1.9%, lower than the central bank's forecast for 2%. 

Norway, the richest Nordic country on a per-capita basis, faces growing labor shortages and wage pressures after regaining pre-pandemic output levels before most peers. 

The finance ministry has warned of overheating, and last week Norges Bank raised rates and envisaged seven further quarter-point hikes by the end of next year, cementing its status as one of the most-hawkish monetary authorities. 

The data “speaks in favor of Norges Bank sticking to plan of hiking again in June,” Swedbank's analysts Kjetil Martinsen, Marlene Skjellet Granerud and Jon Espen Riiser said in a report. 

They added that lower joblessness largely reflects recent reopening of the economy from the pandemic. “Pressure on Norges Bank to ease capacity issues continues to mount.”

Complementing the picture of a robust rebound, Norway's purchasing managers' index unexpectedly increased to the highest in four months. 

“In sum, two strong prints that beat expectations -- but in our view not enough to alter probability for Norges Bank going more than 25 basis points per quarter,” Danske Bank's analyst Frank Jullum said.

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