Employment Rising in Rapid Recovery
With the recovery of the world economy, Swedish exports have surged. Rising household consumption and business investment are also helping to strengthen the economy. Employment is going up as well and will increase by some 140 000 persons in 2010-2012. Taken together, these factors will mean high growth figures for the entire forecast period. Despite vigorous growth, however, unemployment will be high for the next few years. It will therefore be necessary to maintain an expansionary economic policy.
Exports will be up by more than 10 percent for the full year 2010. In the following years the market for Swedish exports will be expanding less strongly, while the Swedish krona will continue to appreciate. Nevertheless, exports will remain a major driving force in the next few years. Domestic demand will play a much more central role than in previous economic upturns. Monetary policy will be highly expansionary, and fiscal policy will also have an expansionary stance in 2011. In combination with an improved labour market, this means that real household income will increase by almost 7 percent in 2010–2012. Considering that household saving is at an historic high and that interest rates are low, consumption is expected to rise more rapidly than incomes in the next few years.
With the recovery of the economy and growing optimism in the business sector, employment has been surging this year. At the same time, the labour force has been expanding, a normal tendency in economic upturns, when the chances of finding a job improve. But the strong rise in labour force participation in 2010-2012 will also be attributable to the tax credit on earned income and to changes in the sickness insurance system, which are expected to increase the labour force. Unemployment will recede gradually and will not drop much below 8 percent by the end of 2012.
However, the fragility of the world economic recovery casts a shadow on this bright picture. The road back to economic balance is long and lined with uncertainty.
THE LOW RESOURCE UTILISATION CALLS FOR MAINTAINING AN EXPANSIONARY POLICY
The prolonged slump of the labour market will require an expansionary economic policy for the next few years. According to the NIER’s forecast, further unfunded measures totalling SEK 25 billion will be implemented in 2011, in addition to those already adopted or announced by the time of the 2010 spring Budget Bill. This is consistent with the NIER’s view of an appropriate stance for fiscal policy. In present circumstances the NIER’s opinion is that no further unfunded measures should be implemented in 2012, assuming that the forecasts for fiscal policy and the development of the economy prove accurate.
The repo rate is expected to be 1.0 percent at year-end. Then, as the economy strengthens, the rate will be raised gradually to 2.75 percent at the end of 2012 and is expected to exceed 4 percent in the years immediately following.
Table: Selected Indicators
Annual percentage change and percent, respectively
| 2009 | 2010 | 2011 | 2012 | |
| GDP at market prices | –5.1 | 4.3 | 3.4 | 3.0 |
| GDP, calendar-adjusted | –5.0 | 4.0 | 3.4 | 3.4 |
| Real GNI per capita | –7.2 | 2.6 | 3.0 | 2.5 |
| Current account 1 | 7.2 | 6.2 | 6.5 | 6.7 |
| Number of hours worked 2 | –2.6 | 1.7 | 1.0 | 1.1 |
| Employment | –2.3 | 1.0 | 1.1 | 1.0 |
| Unemployment 3 | 8.4 | 8.5 | 8.2 | 8.0 |
| Labour market gap | –3.9 | –3.2 | –2.7 | –2.2 |
| Hourly earnings, business sector 4 | 3.2 | 2.3 | 2.6 | 3.1 |
| Cost of labour, business sector 2 | 2.3 | 0.5 | 3.3 | 3.2 |
| Productivity, business sector 2 | –3.6 | 2.8 | 2.8 | 2.5 |
| CPI | –0.3 | 1.1 | 1.6 | 2.1 |
| CPIF | 1.9 | 2.0 | 1.3 | 1.5 |
| Repo rate 5 | 0.25 | 1.00 | 1.75 | 2.75 |
| Interest rate, 10-year government bonds 5 |
3.2 | 3.1 | 4.0 | 4.6 |
| Index for the Swedish krona (KIX) 5 | 120.3 | 113.1 | 111.1 | 109.1 |
| General government net lending 1 | –1.0 | –0.6 | –0.8 | –0.1 |
| Cyclically adjusted net lending 6 | 2.5 | 1.4 | 0.8 | 1.0 |
1 Percent of GDP. 2 Calendar-adjusted. 3 In percent of labour force. 4 According to Short-Term Earnings Statistics.
5 At year-end. 6 Percent of potential GDP.
Sources: Statistics Sweden, National Mediation Office, the Riksbank and NIER.
For more information contact:
Peter Svensson, Head of Division +46 8 453 59 08
Mats Dillén, Director General +46 8 453 59 66
Sarah Hegardt Grant, Head of Communications, phone: 46-8-453 59 11