March Labour Report Shows Slight Decrease in Unemployment

reykjavík construction

The monthly report issued yesterday by the Directorate of Labour shows a slight decrease in March unemployment numbers.

The Directorate of Labour report shows March 2024 unemployment rates sitting at 3.8%, a decrease from February’s rate of 3.9%. In total, the report shows an average of 7,518 unemployed individuals in March 2024.

Differences by gender, region

Of the total unemployed in March 2024, some 4,344 were men, and 3,174 were women.

There were also some regional differences in unemployment. As might be expected, unemployment rates were higher on the Reykjanes peninsula, the area affected by the ongoing eruptions near Grindavík. Unemployment on the Reykjanes peninsula was recorded at 6.5% for March 2024, a slight decrease from 6.9% in February.

Unemployment rates generally went down for the entire nation except in the capital region. In the capital region, rates remained stable at 3.8%.

North Iceland saw the lowes rates, at 1.5%, and the next-lowest rates were recorded in East and West Iceland, around 2.7%.

Other figures from the report

A total of 283 new jobs were advertised in March through the Public Employment Service.

In March, 81 individuals received recruitment subsidies within companies or institutions, and eight individuals received start-up subsidies.

In March 2024, the Public Employment Service issued 142 work permits to foreign nationals to work in Iceland, 110 of which were in the capital area.

 

 

 

Another Collective Bargaining Agreement Signed

A new collective bargaining agreement was signed yesterday, Vísir reports, between the Confederation of Icelandic Enterprise (SA) and the labour unions The Electrical Industry Association of Iceland, the food and restaurant union Matvís, the Icelandic Union of Marine Engineers and Metal Technicians, and the printers’ union Grafía.

Stability and gratitude

The contract worked out between the parties is to last four years, and outlines terms similar to the agreement recently approved by the labour union Efling and others last week.

SA director Sigríður Margrét Oddsdóttir told reporters that the aim of the agreement was for “economic stability”, adding, “We are just incredibly proud and grateful after the day today.”

Ball in their court

Kristján Þórður Snæbjarnarson, the director of the The Electrical Industry Association of Iceland, was more guarded in his response to the contract.

While saying that it was indeed good news that their workers had gotten new wage agreements, a pay rise is not the only thing that affects economic stability and keeping up with the cost of living.

“It is also extremely important that interest rates and inflation reduce,” he told reporters, adding, “The ball is in the court of the Central Bank, companies in this country, and state and local authorities to hold back on tariffs and participate in this project with us. That, of course, is what matters. We send the ball their way.”

More negotiations to come

The next major round of labour negotiations is to take place between SA and VR, which is the labour union of employees in commerce, services and offices.

Talks between SA and VR have been contentious, and were recently broken off, but talks between the two parties are set to resume tomorrow.

Central Bank Governor to Stay On

Ásgeir Jónsson, Governor of the Central Bank of Iceland

Ásgeir Jónsson, the Governor of the Central Bank of Iceland, will stay on until the year 2029, RÚV reports.

The Governor’s term was set to end August 20 this year. According to law, Prime Minister Katrín Jakobsdóttir would have had to inform Ásgeir with a six months notice if the position were to be opened for other candidates. This did not take place and Ásgeir’s tenure was therefore automatically extended for five years.

Tumultuous term in office

Ásgeir was appointed in 2019 and has faced challenges during his term. The Covid-19 pandemic affected the economy greatly and the Central Bank’s response was to drive down interest rates to fuel economic activity. At their lowest, they were 0.75%, the lowest rate in Iceland’s history.

After the pandemic, inflation has been high and persistent. Since mid-2021, interest rates have steadily gone up and now stand at 9.25%.

In Focus: The Króna and the Euro

icelandic króna isk

The Icelandic króna was introduced as currency when Iceland gained its sovereignty from Denmark in 1918, with the first coins issued in 1922. At the time, one Icelandic króna was equal to one Danish krone. Today, the Icelandic króna has been devalued to such a degree that you’d need 2,000 of the original króna for […]

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Deep North Episode 57: Balancing the Scales

escaped farmed fish iceland

On Saturday, October 7, a tractor trundled through the streets of downtown Reykjavík with hundreds of protestors in tow. The procession was headed to Austurvöllur Square in front of Iceland’s Parliament for a demonstration.

Several organisations – including Landvernd (the Icelandic Environment Association) and the Icelandic Wildlife Fund – had organised the event to protest salmon aquaculture in open-net sea pens, an industry that grew more than tenfold in Iceland between 2014 and 2021. During this period, annual production ballooned from nearly 4,000 tonnes of farmed salmon to approximately 45,000 tonnes.

The reason protestors were demonstrating was because the growth of the industry had coincided with what some would call predictable problems. Aside from the potentially negative environmental impacts that salmon farming in open-net pens poses – including pollution from fish waste, uneaten feed, and chemicals or medicines used to treat diseases – Iceland had recently witnessed firsthand two of the industry’s primary risks: the escape of genetically-distinct farmed salmon of Norwegian origin from open-net pens (threatening introgression with wild populations), and the proliferation of diseases and parasites, most notably sea lice.

Read the full story here.

Deep North Episode 44: Working it Out

work week iceland

A few years ago, Iceland instituted a four-day work week. It’s gone off without a hitch and everyone’s been happier since. At least that’s the story that has spread through foreign media outlets.

The truth is much more complex. Firstly, it’s not a four-day work week, but a 4.5-day work week. Secondly, it technically only applies to public service workers. Thirdly, although preliminary data shows the shortened work week has had many positive impacts, there are still many kinks to work out in its implementation. And when we examine those kinks, we begin to realise that long working hours are only one of the challenges faced by Iceland’s labour market – and that the shortened work week is only one solution of many that will be needed in the coming years.

Read the story here.

Further Aquaculture Permits Put on Hold

arnarlax fish farm iceland

RÚV reports that further aquaculture permits have been suspended by the government, citing the recent growth of the industry and recent concerns about local fish stocks.

Read more: Extensive Hybridization Between Farmed and Wild Fish Stocks

Fish farming has grown significantly in recent years. In 2014, some 8,300 tonnes of farmed fish were exported by Iceland. According to the latest data from 2022, that number has now risen to more than 51,000 tonnes.

Profits have likewise risen rapidly, the total export in 2014 accounting for ISK 1.4 billion [$10.3 million, €9.6 million]. By 2022, that number had risen to ISK 40.5 billion [$298 million, €279 million]. Top importers have been the US, Holland, Germany, Denmark, France, and the UK.

Read more: Damning Report on Iceland’s Fish Farming Industry

The government decision came in the wake of a recent report on the industry, which found a patchwork of regulation that left the industry largely unsupervised.

One major concern which has made recent headlines is the hybridization of farmed fish following their escape from pens. Conservationists are concerned that the farmed fish introduce parasites into native fish stocks, in addition to competing with them for food. At least 16 cases of escapes have been documented by MAST, the Icelandic Food and Veterinary Authority. Most recently, some 3,500 fish went missing in Patreksfjörður.

The majority of fish farming is practised in the Westfjords, where it accounts for some 5.5% of local jobs. But the industry has also grown significantly in the Eastfjords as well, where it has become a much-debated issue.

Recently, residents of Seyðisfjörður expressed their opposition to proposed increases of the industry in the area, stating that it would narrow the available shipping lanes. In addition to a ferry, Seyðisfjörður is also visited by a number of cruise ships each year, which have become an important part of the local economy.

 

Minister Questions Rising Prices Amid Strengthening Króna

The Minister of Culture and Business Affairs is seeking clarification from major grocery chains on why the prices of perishable goods have risen, despite a strengthening króna and a global downturn in inflation, RÚV reports.

Impact of Tourism on Inflation

On Wednesday, the central bank increased its key interest rate by 0.5%, bringing it to 9.25%. Leaders from the Icelandic Confederation of Labour (ASÍ) and the VR union have expressed concerns about the tourism industry’s rapid expansion, arguing that it has led to an overheated economy. However, Minister of Culture and Business Affairs, Lilja Alfreðsdóttir, who also manages tourism matters, countered some of these claims in an interview with RÚV. She pointed out that the expected number of tourists for the current year mirrors 2018 figures, indicating that the growth isn’t as significant as some suggest. Furthermore, increased tourism means a stronger króna.

“Because the tourism sector has been doing well, it has funnelled substantial foreign currency into the country. This inflow of foreign funds has actually helped curb inflation by strengthening the króna,” Lilja Alfreðsdóttir noted.

Unexplained Rise in Price of Perishable Goods

Lilja found it noteworthy that, according to the Monetary Policy Committee of the Central Bank, the price of perishable goods has surged by 12.2% year-over-year. This is perplexing, given that the króna has appreciated by 6.6% and global inflation rates have fallen. She has called upon the key market players to provide an explanation for this unexpected trend.

“Meetings are scheduled with major vendors of perishable goods early next week, and we will also consult additional sources, such as Statistics Iceland, to understand the situation better,” Lilja stated. “The main objective for society is to rein in inflation, thereby paving the way for lower interest rates and providing households with financial relief. Any anomalies contributing to inflation, particularly when the currency is strengthening, require meticulous examination.”

Annual Inflation Rate Now at 7.6%

Reykjavík walking district laugavegur

The latest numbers released today by Statistics Iceland indicate that the annual inflation rate now rests at 7.6%.

The government has introduced measures to fight inflation over the past few months, including increasing security pensions, curtailing salaries for senior officials, and the postponement of several construction projects.

Earlier this year, Íslandsbanki forecast that inflation rates would drop to 8% by year-end.

Some of the reduction can be accounted for by summer clearance sales, which have partially driven down the costs of some consumer goods, such as clothing and consumer electronics.

Clothes and shoes have decreased in price by 7.7 per cent, while furniture and household appliances have decreased by 2.4 per cent.

Sales have been relatively strong in the past three years, which can be attributed to the high demand during COVID for such products.

 

The cost of housing in private homes decreased by 0.7 per cent, but airfares increased by 13.9 per cent. Additionally, the wage index has increased by 1.1 per cent in the last twelve months, and by 10.9 per cent over the past twelve months.

The Monetary Policy Committee is set to reassess interest rates on August 23, and it is possible that these latest developments may be taken into consideration.

Agreement Reached Between Central Bank and Íslandsbanki

íslandsbanki

In a statement published this morning by the Central Bank of Iceland, an agreement has been reached to conclude the matter of Íslandsbanki’s controversial March 2022 sale of shares.

The statement can be read here, in Icelandic.

The Financial Supervisory Authority of the Central Bank of Iceland has been examining the alleged violations by Íslandsbanki of security trading regulations since last year. The examination by the Financial Supervisory Authority focused on the conduct of Íslandsbanki in the offering of the state’s 22.5% ownership stake in Íslandsbanki in March of last year.

The report states that “the management and CEO of Íslandsbanki have not implemented satisfactory governance practices and internal monitoring, which ensure effective and prudent management, including the failure to ensure that the bank complies with legal requirements regarding the provision of investment services and adherence to its own internal regulations.”

Íslandsbanki to Pay ISK 1.2 Billion in Fines

Preliminary findings of the Financial Supervisory Authority were sent to Íslandsbanki on December 30, 2022. In a letter dated January 6, 2023, Íslandsbanki expressed its intention to resolve the matter through a settlement with the Financial Supervisory Authority of the Central Bank.

By signing the agreement, Íslandsbanki admits to having violated specific provisions of the Act on Securities Transactions, in addition to committing to take remedial measures. Íslandsbanki is required to pay the fine to the treasury by November 1, 2023.

Among the violations described in the report are Íslandsbanki’s failure to record phone calls, providing customers with inaccurate information about the terms of the offering, and incorrectly assessing customers’ applications to be classified as professional investors. The March 2022 offering was nominally only open to professional and institutional investors. However, Íslandsbanki classified eight clients, who were retail investors, as professional investors without meeting the legal criteria.

Additionally, the bank did not take sufficient measures to prevent conflicts of interest, such as the involvement of directors and employees of the bank in the offering and adequate separation of duties, and the bank did not conduct a proper risk assessment in relation to its participation in the sales process.

Finally, Íslandsbanki was found to have failed to fully meet its obligations to operate in a fair, honest, and professional manner, in accordance with “normal and sound business practices.”