Denmark on a downward spiral

Despite improving unemployment figures, economists warn that overall development is on a downward trajectory

August was a deemed a good month in terms of unemployment statistics, with a drop of 0.1 percent. Now there are ‘only’ 162,700 people without a job in Denmark and things look brighter.

But the buck stops there, because the vast number of experts in the nation's banks, mortgage creditors, think-tanks and the labour movement all agree that Danes should brace themselves for further deterioration. Six out of seven economists are pessimistic about the future of the Danish economy.

In particular, the financial experts referred to three new statistical compilations that support their belief that the promising unemployment figures of August are an anomaly in otherwise bleak prospects: the service, construction and industrial sectors all offer gloomy profit and employment expectations.

In addition, the number of forecasted layoffs has also recently increased despite the finance minister, Bjarne Corydon (Socialdemokraterne), and the economy minister, Margrethe Vestager (Radikale), both predicting growth in Denmark in 2013.

A number of economists disagreed with the politicians' predictions, but the ministers have stood by them, even after Berlingske newspaper reported on Tuesday that 186 of the country’s top bosses had warned of new layoffs within the next six months. Even more were considering layoffs and moving jobs abroad to cheaper markets.

As a result, a number of economists have gone on record arguing that the future doesn’t look as rosy as the recent political commentary has suggested.

“The growth rate here at home is once again negative after a long period of stagnancy, which means that growth is still far from the level that is normally acceptable in order to stabilise employment,” Tore Stramer, a senior economist for Nykredit, said. “We expect that unemployment will rise throughout the rest of the year and will top out at around 170,000 people by the start of 2013.”

Jan Størup Nielsen, a senior analyst at Nordea bank, concurred with Stramer and said it was too early to bust out the celebratory champagne.

“There are a number of indicators that convey that the activity in the Danish economy is still too low to sustain the current employment figures,” Nielsen said. “And that projection has been further confirmed by the freshly-published market barometer, which illustrates pessimism in the industrial and service arenas.”

Erik Bjørsted, a senior analyst at the economic labour movement council Arbejderbevægelsens Erhvervsråd, also expected unemployment figures to rise to about 175,000 people in 2013, but warned that there were other factors involved.

“At the same time, the debt crisis continues to be an unpredictable wildcard and if the initiatives by the European Central Bank fail to stimulate the required tranquillity, the European and Danish economies may be caught in a crisis of trust that will further complicate the unemployment mire,” Bjørsted contended.