There are also other figures in Statistic Iceland¿s survey which suggest that the trough of the downturn has been reached on the labour market. Thus, in succession, unemployment fell, the labour force participation rate increased and average working hours were extended. A total of 16,200 people were unemployed in the second quarter, compared to 16,700 people in the same period last year. The number of people in employment was estimated at 169,500 in the second quarter, compared to 167,500 people in the second quarter last year. Working hours are estimated at 40.2 hours per week in the second quarter, compared to 40.0 hours in the same quarter last year.

As is known, economic growth was recorded both in the fourth quarter of last year and the first quarter of this year.  In the fourth quarter of last year, economic growth measured at 0.7%, and in the first quarter of this year it measured at 0.6% . Economic growth has therefore been recorded in two consecutive quarters, which is often the required criteria for declaring that the bottom of a recession has been reached. The above labour market figures corroborate that conclusion.

The seasonal labour market pattern in Iceland has been that unemployment is generally highest in the second quarter than in any of the other quarters. The unemployment rate is generally considerably lower in the third and fourth quarters. It can therefore be assumed, both from economic trends and seasonal fluctuations on the labour market, that unemployment peaked in the third quarter of 2009 in this recession, when it reached 9.1%.

However, one should bear in mind when interpreting these labour market survey results from Statistics Iceland that they are based on a sample survey, and there is therefore some uncertainty regarding the figures. E.g. the safety margin (95%) in these unemployment results is therefore +/- 1.1% and +/- 1.2% for the labour force participation rate figures.

Unemployment is higher in many other countries
Statistics Iceland's labour market survey is conducted in a broadly similar manner in other states within the European Economic Area. This provides a significant yardstick for comparing unemployment levels in Iceland with those of neighbouring countries. Because these surveys take a long time to be processed in the various states within the EEA, the most recent comparable figures that can be used are from the fourth quarter of last year. These figures show that, even though there has been a considerable rise in unemployment in Iceland since the currency and banking crisis struck in 2008, it is still below the EU average. Thus unemployment in Iceland was 6.7% in the fourth quarter of last year, compared with the 9.3% average of EU member states. Unemployment levels are considerably higher in the rest of Europe than they are in Iceland. According to the above survey of EEA states, unemployment was highest in Latvia (19.7%),  Spain (18.8%) and Lithuania (15.6%). The lowest unemployment rates were recorded in Norway (2.9%), Holland (3.8%) and Switzerland (4.1%).


Real wages increase

Increases due to wage agreements
Increases in the wage index can, on this occasion, be largely attributed to wage rises stipulated in wage agreements. According to an agreement between the Icelandic Confederation of Labour (ASÍ), the Confederation of Icelandic Employers, and the Confederation of Icelandic Bank and Finance Employees, wages increased by a minimum of 2.5% at the beginning of June 2010. Moreover, in the same period, minimum wages increased by ISK 6,500, according to an agreement between the Association of Local Authorities and the Federation of State and Municipal Employees and ASÍ. Corresponding agreements were made between the Minister of Finance, on behalf of the State Treasury and the Federation of General and Special Workers and the Federation of State and Municipal Employees.

Greater equilibrium ahead
Real wages have decreased by an average of 11.3% since they peaked at the beginning of 2008. They are now similar to what they were at the beginning of 2002 and most of the increases observed since the beginning of the century have therefore receded over the past two and a half years. A more positive trend now seems to be evolving in the development of wages and prices. Real wages will presumably continue to increase in the months ahead, particularly as a result of slowing inflation.
 
Balance of payments index rises in July
The balance of payments index for August was published in conjunction with the wage index, since the former index changes in accordance with developments in the wage index and employment levels.The balance of payments index increased by 3.1% between months, which can be attributed to a drop in the unemployment rate between June and May and the increase in the wage index.The balance of payments index is currently at 100.6 bps, which is its highest level since measurements started in January 2008. The debt burden of mortgage holders in the balance of payments will therefore be higher than it was at that time.