Four years later, employment in the United States has still not recovered more than approximately one third of the fall that occurred during the crisis. To refer back to what I said earlier, one could say that Europe’s debt crisis is a variation on the theme of excessive indebtedness, although primarily for the public sector in this case. Figure 10 shows how much unemployment has increased in several other countries that have suffered a downturn on the housing market. I have included Sweden and the OECD as a whole for the purposes of comparison. Figure 10. Large increase in unemployment in countries affected by a downturn on the housing market Unemployment, index 2007=100 350  350  OECD Ireland (-30.8 per cent) Spain (-14.8 per cent)  300  300  Denmark (-19.4 per cent) UK (-13 per cent) USA (-17.5 per cent)  250  250  Sweden (-0 per cent)  200  200  150  150  100  100  50  50  0  0 00  01  02  03  04  05  06  07  08  09  10  11  12  13  Note. The figures in brackets present the fall in real housing prices from the peak to the trough. The broken lines represent OECD forecasts.
A higher policy rate may also contribute to strengthening the krone exchange rate, which may curb imported goods inflation further out. Chart 3 Substantial labour shortages, but signs of cooling Activity in the Norwegian economy is high. Employment has risen over the past year, and labour shortages have become pronounced. Unemployment is at historically low levels. We are now seeing clear signs of a slowdown in the Norwegian economy. High inflation and rising interest rates have led to a fall in household consumption. Labour shortages appear to have eased somewhat. High electricity prices are also reducing profits for many firms. We projected a cooling of the economy in the course of autumn this year, but it now appears that the economy has passed a cyclical peak and that the slowdown may prove to be more pronounced. We have revised down our projections for economic activity ahead on the back of higher inflation in Norway and a weaker outlook for our trading partners. As things stand, prices will rise at a notably faster pace than wages this year. Many households will face a squeeze on their finances. Some people will find it difficult to cope with higher borrowing costs on top of the broad rise in prices. But most households have the finances to cover increased expenses. Next year we expect wages to rise at about the same pace as prices. Our projections for wage growth are in line with the expectations of the social partners according to Norges Bank’s Expectations Survey.