Swedish labor market data worsens in July, jobless rate rises to 7.1 pct

The Swedish labor market data came in worse than expected in July. Employment in Sweden dropped 0.5 percent in the month, whereas jobless rate rose to 7.1 percent, which is the highest reading since August 2016. The Swedish central bank, Riksbank’s, projection shows that jobless rate would stabilize at 6.6 percent in the coming years. The labor supply came out in line with the expectations and the participation rate reached the highest reading since 1991.

The fluctuations in the monthly figures are mainly because of a statistical noise, particularly the summer months are surrounded with considerable uncertainty. The bigger picture is that employment continues to be on an upward trend, owing to the booming economy. The demand for labor would possibly stay high in the quarters ahead, noted Nordea Bank in a research report.

Overall, a continued tight labor market provides the central bank hope that wage drift will increase, which in turn should raise inflation. However, wage rises so far have been lower than expected and the Riksbank had to downwardly revise its forecast for wages in the July report. Wage drift would probably rise, but is not enough for inflation to steady at the 2 percent target.

The government revealed that they would downwardly revise its jobless rate forecast markedly in the upcoming budget bill. Unemployment is now expected to decline to 5.9 percent in 2018, which is 0.5 percentage points lower than the earlier forecast. The downward revision was mainly due to political measures that are to be taken in the upcoming budget bill and therefore yet unknown.

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