Rise in Danish unemployment ‘sign companies letting staff go’

The number of people out of work on the Danish labour market continues to creep upwards, and data suggests it can no longer be written off to the arrival of job-ready Ukrainian refugees. 

Rise in Danish unemployment 'sign companies letting staff go'
File photo showing entrance to a Danish job centre. Unemployment has crept upwards for the third consecutive month. Photo: Søren Bidstrup/Ritzau Scanpix

According to data from Statistics Denmark, about 2,800 more people were unemployed in July than in June.

Recent increases in unemployment numbers have been attributed to the arrival in Denmark of refugees from Ukraine who are declared fit to work shortly after being granted residence.

But the number of unemployed Ukrainians increased by only 200 in July. 

The latest figures are instead a sign that “companies have quietly started to get out the redundancy notices,” Sydbank chief economist Søren Kristensen told news wire Ritzau. 

Despite what appears a concerning trend, overall unemployment remains low. The unemployment rate of 2.7 percent, or about 77,800 people out of work, is among the lowest ever recorded in Denmark.

The number of people considered long-term unemployed – not in employment for 80 percent of the previous year – is currently the lowest it has been since records of the metric began in 2007.

An increase in the number of unemployed could indicate a healthy cooling of the red-hot Danish employment market, in which companies have struggled to fill open roles, Kristensen said. 

“We have to recognise that the risk of overheating in the economy is quite real. The combination of such low unemployment and such high inflation is a breeding ground for unsustainably high wage increases,” the economist told Ritzau in a written comment.

“We can’t say this is what we’re seeing at the moment,” he added, noting that the “risk has fortunately decreased after today’s numbers”.

Economists expect further increases to unemployment numbers in the near future.

“We still expect to be looking at a period in the autumn and winter where unemployment increases further. Not necessarily dramatically, but an increase nevertheless, which will show that the situation on the labour market and in the economy is changing significantly,” he said.

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Unemployment down in Denmark but analysts predict more without work

The number of people without work in Denmark fell slightly in October, with the total of 75,200 lower than September’s figure by 200.

Unemployment down in Denmark but analysts predict more without work

The data from Statistics Denmark therefore show a marginal decrease, which does not translate to a percentage drop in employment according to the agency.

That means 2.6 percent of Denmark’s workforce is still currently unemployed.

“The small drop in October is due to 300 fewer non-activated [not in return-to-work programmes, ed.] and 100 more activated jobseekers,” Statistics Denmark said.

Unemployment appears to still be trending downwards, which analyst Brian Friis Helmer of Arebejdernes Landsbank said was surprising.

“We have an economy that actually looks good but we have sky-high inflation and dreary economic forecasts. So it’s surprising that both unemployment and employment still seem to be withstanding this headwind,” he said.

But it is a matter of time before unemployment begins to creep upwards, according to senior economist Tore Stramer of the Danish Chamber of Commerce (Dansk Erhverv).

“The more forward-looking key metrics for the labour market have unfortunately begun to wobble considerably in recent months,” Stramer said.

“The number of available job notices has fallen by around 22 percent since February and the number of redundancy notices has meanwhile increased to the highest level since the coronavirus crisis in 2020,” he said in a written comment to news wire Ritzau.

The economist said he expects unemployment to go up by between 25,000 and 50,000 by the end of 2023.

An additional 20,000 people could lose their jobs in 2024, he said.

The construction and hospitality sectors could be amongst the most vulnerable,” he said.

Another analyst, Sydbank senior economist Søren Kristensen, also told Ritzau he believes unemployment will go up but said a slight cooling down of the labour market might be beneficial. Denmark is currently experiencing a labour shortage in several sectors.

“But we are concerned this might be a case of more than just a cooling-off,” he said.

“We expect a fall in employment figures of more than 60,000 persons during the course of 2023. They won’t all show up as being unemployed persons but we could easily end up in a situation where interest and inflation combine to catapult the number of unemployed people to over 100,000,” he said.