Weakness in labour market increases the chance of another rate cut from Norges Bank

Statistics Norway released unemployment data earlier today, which came in higher than expected suggesting that Norway's unemployment is gradually rising and employment has stagnated. LFS unemployment came in at 4.8% in January, missing Reuters consensus for 4.5%. The number of unemployed in January was 134,000, compared with 128,000 in December and 129,000 in October (all LFS figures are three-month average). The number of unemployed has risen by 25,000 since January last year.

Norges Bank downplays the monthly developments in LFS unemployment as it considers the LFS figures as being volatile. The previous two months showed a slight decline in unemployment and considering that today's data appears to be somewhat misleading. However, more confirmations that the labor market weakens further will increase the chance of another interest rate cut from Norges bank.

Norges Bank has forecasted the average unemployment for 2016 to 4.6% and that unemployment should then subside. Today's figures suggest that unemployment is still on an upward trend and raises chances of more cuts from the c.bank.