The UK has periodically experienced episodes where the exchange rate is strong, the external balance deteriorates and, on the production side of the economy, the traded sector gets “crowded out”. One often hears that all this is the “consequence” of an “over-valued exchange rate”, as if that were some arbitrary, unexplainable thing. Chart 2: Stronger domestic demand tends to push up the exchange rate  Chart 3: UK data bear this out  Source: ONS and Thomson Reuters Datastream  But in these situations the exchange rate is more symptom than cause: the underlying driver is relatively 5  strong growth in domestic demand . And it’s this that jointly pushes up both the value of currency and the 6  trade deficit . Indeed I think this helps explain to explain why sterling appreciated so strongly after 2012 (and until last year): relative to their respective incomes, domestic demand grew much more strongly in the UK than among its main trading partners in continental Europe. There’s a limit to the duration of financial deficits, at an aggregate as well as an individual level. It was always unlikely that the UK could finance a 5%-of-GDP current account deficit indefinitely and the market would presumably have anticipated a closure at some point, partly via weaker growth of domestic demand. But one possibility, regarding sterling’s recent behaviour, is that the foreign exchange market believes that leaving the EU will hasten the correction of these imbalances.
This is slightly higher than the national average of 3.9 per cent. Even though the region has somewhat higher unemployment than the national average, the rise in unemployment in Northern Norway has been relatively low in the last year. Finnmark is one of the four counties in Norway to record the sharpest fall in unemployment over the past year. This snapshot report on the current situation in this part of the country and similar reports from the other regions provide information that is important to interest-rate setting. The labour market has improved. The number of persons employed in Norway began to increase in summer 2003 and unemployment stabilised. Employment in distributive trades has increased. There are also signs that employment is rising in service sectors such as education, the public sector and health and social services, from the weak levels recorded in the first six months of last year. Manufacturing employment remained well below the level one year earlier in the fourth quarter of 2003, but is falling at a slower pace. Unemployment has been fairly stable. Adjusted for seasonal variations, LFS unemployment stood at 4.4 per cent of the labour force in January. Growth in household demand, petroleum investment and increased activity in the business sector are paving the way for a rise in employment in the period ahead. On the other hand, intensified competition and continued rationalisation in the business sector may have a dampening impact on labour demand.