Swedish jobless rate rises sharply in June, likely to remain at high levels for long time

Swedish jobless rate rose sharply in the month of June to 9.2 percent from May’s 8.5 percent, coming above consensus expectations. The labour supply dropped and were down by 0.4 percent sequentially while the share of discouraged workers rose rapidly, reaching its highest level in at least 15 years.

Employment dropped by 1.2 percent on the month and fell 2.8 percent year-on-year, explaining the sharp rise in unemployment. The rate of employment dropped to 66.2 percent from 67 percent in May. Hours worked per week fell 8.4 percent compared to June last year, which was slightly better than in May.

Nevertheless, one should be slightly cautious interpreting the June numbers as it usually consists of many young workers in summer jobs. This year, several companies have cut back on these types of jobs, which partially explains the big drop in employment.

Overall, the labor market is performing in line with expectations and the Riksbank’s latest forecast. If anything, it is on the margin performing slightly better than feared looking at the full quarter, said Nordea Bank in a research report.

“However, the drop in employment so far during the corona crisis is much bigger than the drop during the financial crisis. Unemployment will remain at high levels for a long time. The worst decline may be behind us - but there is no fast recovery in sight for the Swedish labour market, indicating that cost pressures from high labour demand is very far off in the future”, added Nordea Bank.