Sweden’s wages rise year-on-year in December, likely to pick up in years ahead

Swedish wages rose 2.6 percent year-on-year in December, consistent with projections. On a year-on-year basis, wages rose 2.6 percent. That could be compared to the wage rise in previous years when wages rose at a rate of 2.3 percent and 2.4 percent in 2017 and 2016, respectively.

In 2018, wage rises mainly stem from the business sector in which wages rose 2.5 percent year-on-year compared to 2 percent year-on-year in 2017. Nevertheless, the trend of pay raises has been slightly declining in the sector since mid-2018. During the first six months of the year wage rises were 2.6 percent, compared to 2.4 percent in the past six months.

On the other hand, wage rises in the public sector were slightly lower in 2018 compared to in 2017. However, unlike the business sector, the trend for wage rises has been rising in the public sector. The development is partially explained by continued focus on teachers’ salaries. The Swedish National Mediation Office showed that the wage rise in the public sector might also be explained by the solid demand for labor force.

Even if the Swedish economy is decelerating the labor market continues to be tight. Labor shortage has eased a bit but is still at record high levels and employment plans continue to be stable. Normally this should lead to wage rises well above the levels seen. Low productivity and the composition of the labor market partially explain the low wage growth, noted Nordea Bank.

“Going forward we see few signs of wages picking up in the coming years and we believe that the Riksbank’s forecast of pay raises of 2.8 percent y/y and 3.2 percent y/y for 2019 and 2020 is too high”, added Nordea Bank.