Swedish jobless rate rises slightly in March, domestic growth likely to lose steam going forward

Swedish unemployment rose in March, as widely expected. On a seasonally adjusted basis, Sweden’s jobless rate rose to 6.2 percent in March from 5.9 percent seen in the prior month. This is a stronger reading than the Riksbank’s projection. On an average, the first quarter jobless rate also came in at 6.2 percent. The outcome was below the central bank’s view for the first quarter.

Employment fell slightly and dropped from the sharp rise seen in February. Employment growth came in at -0.3 percent sequentially, as expected. Labor supply remained flat at 0 percent in the month.

Overall, the report was strong, although not as solid as the February readings. The labor force survey painted a brighter picture of the jobless rate, than the statistics from the Public Employment Service. Most likely, it is challenging to capture the newly arrived immigrants in the LFS, noted Nordea Bank in a research report.

However, LFS employment, is evidently below the equilibrium unemployment, which gives the central bank hope that wages will rebound. But so far wage growth has been modest and going forward, the domestic economy is expected to lose steam, stated Nordea Bank.

Labor shortages are expected to have peaked, while wage expectations continue to be rooted at today’s level. In spite of a tight labor market, domestic cost pressures are expected to stay strong, strengthening the view than the central bank will remain side-lined until the end of the next year.

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