In Finland, rise in joblessness to linger into next year as cuts gnaw away at confidence in economy

THE MINISTRY of Economic Affairs and Employment on Tuesday published a labour market forecast indicating that dark clouds have continued to gather during the course of the autumn.

The unemployment rate is forecast to rise to 8.4 per cent in 2024, representing a jump of 1.2 percentage points from last year, and further to 8.5 per cent in 2025. In 2026, the rate is forecast to fall back to 8.4 per cent.

Long-term unemployment is expected to continue growing throughout the forecasting period, hitting 100,000 in 2025 and 112,000 in 2026 – accounting for almost 40 per cent of all unemployed job seekers.

The ranks of the employed, meanwhile, are to decrease by 21,000 in 2024 but increase by 15,000 in 2025 and by 27,000 in 2026, mostly as a consequence of immigration.

Experts at the Ministry of Economic Affairs and Employment on Tuesday conceded at a news conference that the erosion of the labour market situation has been surprising, according to YLE. The expectation had been that the employment boost provided by the private sector would roughly offset the effects of cost savings carried out in the public sector.

“A heightened risk of unemployment in the public sector, cuts in social security benefits and tax increases have robbed momentum from the recovery of confidence,” the forecast states.

Minister of Employment Arto Satonen (NCP) insisted at the news conference that the benefit cuts and tax increases have not been too severe and instead attributed the unexpected jump in unemployment to muted export demand and economic growth. The labour market reforms, he reminded, were implemented only a couple of months ago, meaning their effects will not become visible until next year.

He admitted, however, to being concerned particularly about the rise in long-term unemployment.

Aki Kangasharju, the managing director of Etla Economic Research, argued that the employment situation is good in light of the fact that the gross domestic product fell by one per cent in 2023 and it set to contract also in 2024.

“It is comforting that, although unemployment is increasing, it is attributable to immigration and the labour-market entry of Ukrainians. Immigration will boost employment and deliver economic growth in the long term, even though it weakens labour market statistics in the short term,” he was quoted saying by the public broadcasting company.

The Ministry of Economic Affairs and Employment also estimated that the decline in interest rates should be a boon for real estate sales and, consequently, the construction industry, where employment should start growing toward the end of 2025.

The outlook for employment in manufacturing remains bleak due to muted export demand, while the fiscal adjustments carried out by the government reduce employment prospects especially in social and health care services, as well as state and municipal administration.

Consumer-facing services such as retail and restaurant services are forecast to begin recovering early next year as the purchasing power of households improves.

Aleksi Teivainen – HT