Unemployment set to fall

Unemployment in Iceland is set to fall to around 2.5% by 2017, according to forecasts by the Directorate of Labour.

Average unemployment last month was 3.4% and is predicted to be 3.1% for 2015 as a whole. This will fall to 2.8% in 2016 and 2.4-2.5% in 2017, predicts the Directorate of Labour.

Unemployment is set to fall particularly in the tourism industry with possible labour shortages being made good by students on summer placements and foreign workers.

Tensions in the job market

Falling unemployment can, however, in some circumstances be a double-edged sword. According to Karl Sigurðsson, a job-market expert at the Directorate of Labour, “the job market can generally said to be balanced when unemployment is at around 3%.”

“Unemployment in Iceland is set to fall in the near future, bringing greater imbalance between supply and demand. If unemployment is under 2.5% for a protracted period of time, this can create tensions in the job market.”