Unemployment high, but not as bad as originally feared

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Unemployment is growing in Finland and leading economists expect it to continue to increase through the autumn, but after that it should start to ease.
      However, three experts interviewed by Helsingin Sanomat say that there is less unemployment than might be expected at the current point in the business cycle, and that the situation could have been much worse.
     
Statistics Finland and the Ministry of Employment and the Economy released January’s employment figures on Tuesday. According to Statistics Finland, 9.5 per cent of the labour force in Finland were out of work in January, which is 2.6 points more than a year earlier, and 1.6 points more than in December.
      Statistics Finland put the number of jobless in January at 250,000.
      The Ministry of Labour says that in January, 297,000 job-seekers were registered at Finnish employment offices. The number is 4,000 less than in December. The ministry’s message is that growth in unemployment has evened out.
     
According to Jussi Mustonen, head of economic policy at the Confederation of Finnish Industry (EK), the unemployment level now is lower than previously expected. “The situation has not become as bad as might have been imagined.”
      According to Mustonen’s analysis, help has come from flexibility in working hours and temporary layoff practices.
      “Measured in terms of working hours, the input of work has declined more than the head count. It would be a better way to examine the connection between output and labour input. Productivity has declined”, he says.
     
Mustonen predicts that the employment situation will continue to deteriorate. EK surveys indicate that employment expectations for corporate managers are negative.
      Last autumn economists were already declaring that the employment expectations of corporate managers were low.
      “We will go far into the latter part of the year - possibly into next year - before the situation starts to improve. It depends quite a bit on developments in the world economy.”
      Youth unemployment is a serious threat, in Mustonen’s opinion. “If young people do not get into a regular rhythm, they are left with the path that leads to being marginalised.”
     
In the view of Jaakko Kiander, director of the Labour Institute of Economic Research, the employment situation has moved forward in a moderate fashion, “considering that there is such a great decline in output in the background”.
      Kiander says that low interest rates have helped in dealing with unemployment. “It has led to continued consumption, which has maintained employment in commerce and the service branch.”
     
Kiander expects the employment situation to continue weakening through the summer. In the spring, the unemployment rate will go into the double digits, when students leave school and enter the labour market. “In the autumn, employment will start to improve”, Kiander says.
      He does not see youth unemployment to be as serious a problem as Jussi Mustonen does. “In a situation like this, young people have the possibility of going to study and avoiding unemployment.”
     
Also weighing in on the matter is Pasi Sorjonen, chief of forecasts at the Research Institute of the Finnish Economy (ETLA). Who says that the reason why there are fewer unemployed than expected is that the labour force has declined. “People have gone on retirement, to study, or stayed at home.”
      ETLA has forecast that unemployment will reach 11 per cent this year. “It looks like we will have to bring it down”, Sorjonen says.
      He says that companies have shown a positive ability to adapt to the difficult situation.
      “There has been flexibility, thanks to which companies have managed to keep their operations in shape. The situation is quite different from the great recession of the 1990s.”
      Sorjonen says that alternating furloughs have been a preferable for businesses than permanent redundancies would have been. “They can keep their previous employee pool. If people were kicked out, professional skill would atrophy gradually.”


Previously in HS International Edition:
  End of school could bring surge in youth unemployment figures (17.2.2010)
  Unemployment time bomb is ticking in Finland’s export industries (3.2.2010)

Helsingin Sanomat