Based on unadjusted monthly measures from the Icelandic Labour Force Survey, the number of 16-74 year olds active on the labour market was estimated to be 207,100 (±6,600) in September 2020, which is equivalent to an activity rate of 79.2% (±2.5). Of active individuals, the number of employed persons was estimated to be 198,500 (±5,200) and 8,500 (±2,700) unemployed and looking for a job. The rate of employed individuals of the population was estimated to be 76.0% (±2.6) and the unemployment rate 4.1% (±1.3). It is estimated that 54,300 (±6,000) individuals were inactive in September 2020 or 20.8% of the population.

Comparison to measures from September 2019 shows that the activity rate has decreased by 0.9 percentage points between years and the unemployment rate has increased by 0.8 percentage points. The employment rate has decreased by 1.5 percentage points between years and the inactive rate has increased by 0.8 percentage points.

The seasonally adjusted numbers in September 2020 show the number of unemployed to be 9,900 which is equivalent to 4.9% of the labour force. The seasonally adjusted activity rate was 80.2% and the employment rate 75.7%. Compared with August 2020 the seasonally adjusted activity rate and employment rate each decreased by 0.6 percentage points while the unemployment rate decreased by 1.1 percentage points. Over the last 6 months, the trend of the seasonally adjusted employment rate has decreased by 0.3 percentage points and the seasonally adjusted trend of the unemployment rate increased by 1.5 percentage points, from 4.1% in April to 5.6% this September.

The labour market during the Covid-19 pandemic
The effects of the Covid-19 pandemic on the Icelandic labour market are apparent in the year of 2020. Workplaces have been closed due to the ban on gatherings, people have lost their jobs or have not had their employment contract renewed while others have lost opportunities to start new jobs. Since the effect of the pandemic started to show, the labour market has changed and the uncertainty had effects on labour market measurements, e.g. due to different definitions of the concept of unemployment.

It is important to keep in mind that during circumstances as presently seen in the labour market, the common understanding of unemployment does not correspond to the definition of unemployment by the Labour Force Survey. According to the Labour Force Survey, an individual is unemployed if he 1) does not have a job, 2) is actively searching for a job and 3) can start working within two weeks. However, an individual without a job or uncertain whether he will keep his job will possibly not start immediately to look for a new job when workplaces have shut down and economic activities like tourism have declined. Additionally, individuals might be hesitant to assume they can start to work within a short time if there is any kind of uncertainty regarding the employment contract with a former employer.

In the sample for the Icelandic Labour Force Survey in September 2020, 94 individuals were also recorded unemployed at the Directorate of Labour with a 53.2% response rate in the Labour Force Survey. Of those 94 individuals 78% were in general unemployment but 22% in reduced employment and such classified as employed in the Labour Force Survey. Of those who were generally unemployed according to the Directorate of Labour and responded to the Labour Force Survey 55.6% were unemployed according to the LFS, 25% were employed and 19.4% were considered inactive. The response rate of those on record at the Directorate of Labour was 13.5 percentage points lower than the response rate of others which was 66.7%.

This indicates a dropout error which may lead to underestimation of unemployment in the Labour Force Survey. It is important to keep in mind that the reference date for the Labour Force Survey is in the middle of the month but the data from the Directorate of Labour shows the situation at the end of the month. Thus, it is possible that some of those who are employed in the middle of September are unemployed at the end of the month. The comparison also shows that around one-fifth of registered unemployed are classified outside the labour force according to the Labour Force Survey and hence can be seen as having unmet need for employment.

Labour market slack reflects an unmet need for employment in excess of unemployment, reflecting both those on the labour market and those who fall outside the labour market. To count as a part of the labour force according to the definition of the International Labour Organization, an individual needs to be either employed or unemployed. The definition of unemployment in Statistics Iceland Labour Force Survey has been the same from the beginning and is built on the definition of ILO. Unmet need for employment reflects the group of unemployed individuals, the group of individuals in part-time jobs who want to work more and also those who do not count as labour force because they do not fulfil one of the three ILO definitions to be unemployed; that is, individuals without a job but not looking or individuals without a job that can‘t start working soon. In the present circumstances on the labour market, it can be assumed that these conditions fit a growing group of individuals, and the labour market slack has not been higher in the Icelandic labour market since 2015 according to monthly numbers of the Labour Force Survey (see figure 1).

All numbers are weighted by age and gender and rounded to the nearest hundred.

Table 1. Labour market in September — unadjusted measures
  2018 (±95%) 2019 (±95%) 2020 (±95%)
Total 16–74 years
Activity rate 80.8 2.6 80.1 2.7 79.2 2.5
Employment rate 79.6 2.6 77.5 2.7 76.0 2.6
Unemployment rate 1.5 0.7 3.3 1.1 4.1 1.3
Hours of work 38.8 1.1 40.1 1.4 38.6 1.1
Labour force 202,600 6,400 207,200 7,000 207,100 6,600
Employed 199,500 5,100 200,400 5,400 198,500 5,200
Unemployed 3,100 1,500 6,700 2,300 8,500 2,700
Inactive 48,100 5,800 51,600 6,400 54,300 6,000
Est. population 250,800 258,600 261,400
Table 2. Labour market last 6 months seasonal adjustment
Total 1674 years
Activity rate 75.479.5 80.179.980.880.2
Employment rate 70.272.8 75.575.776.375.7
Unemployment rate 5.35.9
Hours of work 37.336.7 36.938.738.137.9
Labour force 195,400203,700 209,400208,400208,900211,600
Employed 183,200190,500 197,900194,800196,000199,300
Unemployed 11,30014,300 8,30012,60012,4009,900
Inactive 61,70055,400 53,70050,90050,10053,000
Est. population 258,500259,500 262,100260,100258,700263,400
Table 3. Labour market last 6 months seasonal adjustment trend
Total 1674 years
Activity rate 80.1 79.9 79.979.880.3 80.5
Employment rate 77.0 77.2 78.277.877.7 76.7
Unemployment rate 4.1 4.5 5.6
Hours of work 37.5 37.3 36.837.938.1 37.6
Labour force 206,900 207,100 208,400208,300209,100 212,400
Employed 198,500 196,300 199,300199,800198,600 201,100
Unemployed 8,500 9,200 9,0009,50010,300 11,000
Inactive 56,400 56,700 55,00052,40050,600 51,600
Est. population 260,600 259,900 262,000260,900259,800 264,200

About the data
The Labour Force Survey for September 2020 covers 4 weeks, from August 31st through September 27th. The sample consisted of 1,539 individuals, 16-74 years old and domiciled in Iceland. When those who were domiciled abroad or deceased had been excluded the net sample consisted of 1,497 individuals. Usable answers were obtained from 986 individuals which corresponds to 65.9% response rate.


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