Continued pressures in the Norwegian economy  1  6  Consensus Forecasts. BIS Review 47/2001  Available labour resources are limited in the Norwegian economy. The labour force participation rate is high. Vacancies are numerous, particularly in the health sector, schools and the construction industry due to a shortage of teachers, nurses, dentists and construction workers. Extensive use of disability and sickness benefits is limiting the supply of labour. Reforms such as contractual pension schemes, which were stepped up through the 1990s, cash allowances for families with small children and an increased number of vacation days this year and next also contribute to reducing the effective labour supply. The country as a whole is experiencing labour shortages, but the differences between regions and industries are considerable. In Eastern Norway, where service industries are very important, unemployment has declined the last year. From 1998 to 2000 alone, employment in private services rose by 26 000 nationwide. In Southern and Western Norway, unemployment rose last year, largely reflecting the decline in manufacturing employment since the beginning of 1999. Unemployment has declined again recently. Employment in the public sector has also increased markedly in recent years. Over the last 30 years, the public sector and private services have laid claim to an increasing share of labour resources in Norway, a trend that will probably continue. BIS Review 47/2001  7  The tight labour market reflects a high activity level in the Norwegian economy. The mainland economy is experiencing an upturn, but growth is low.

The higher profit margins since 1997 may reflect the greater concentration in the grocery trade. 2  Profit margin is defined as operating income less cost of goods as a percentage of operating income. BIS Review 47/2001  11  Labour cost growth and wage costs as a share of income in distributive trades declined sharply until 3 the mid-1990s and have since picked up. This had the opposite effect on operating margins , which fell in the five years to 1999. One possible explanation is that weaker competition in distributive trades the last few years has made it possible to increase profit margins without losing market shares and thereby weakening profitability. This may also have contributed to the industry’s role of spearhead in the wage settlement in 1998. However, a fresh report from the Norwegian Agricultural Economics Research Institute and ECON 4 shows that gross margins on meat in the grocery trade were reduced somewhat between the spring of 1999 and the autumn of 2000. Farmers' margins fell fairly markedly. The survey concludes that it is primarily the processing industry that increased margins on meat products in this period. A substantial share of the food industry is sheltered from international competition through trade policy measures. Analyses conducted by Statistics Norway show that productivity growth in this industry was 5 very low between 1993 and 1999 . Weak productivity growth in this industry and in the graphics and publishing industry contributed to the substantially poorer productivity growth in Norway compared with Sweden in this period.