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Fast Comment SwedenAnother labour market shock - unemployment now a concern for Riksbank and government

  1. Contrary to expectations and other signals from the labour market, unemployment rises after last month's shock
  2. Unemployment is trending uncomfortably high compared to Riksbank and government forecasts
  3. Adds to our view that the Riksbank will ultimately call off planned rate rises

Unemployment is bursting away from forecasts, as well as the up-to-date survey consensus results just ahead of today's print. August unemployment reached 7.4 percent seasonally adjusted (SA) and 7.1 percent actual, increasing from what had broadly been labelled an erratic spike in July. The Riksbank's implicit monthly forecast was, according to our calculations, just above 6.6 percent, SA. We had expected 6.8 and 6.5 percent, SA and actual, while the consensus median was 6.8 and 6.3 percent, respectively.

 



The outcome means we, together with the Riksbank and the government, will have to revise up unemployment in upcoming macro forecast reports (but the government will not have time to make changes ahead of tomorrow's budget bill). And employment did not bounce back at all, so what is happening in the labour market?

 



There is probably some upward bias in the LFS unemployment, as data is catching up with reality after large a inflow in the labour force, on the back of the 2015 refugee crisis. But the fast rise in unemployment can not be explained by that and other labour market data say that there is no drama yet. Indicators are mixed, but overall point to cooling off rather than free fall. The jury is out, and we will need to monitor data extra carefully ahead.




Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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