Swedish Labour Market Update: Record high labour supply

Sweden’s labour market is normalising, but record labour-force participation is keeping survey-based unemployment broadly unchanged even as registered unemployment declines.

• BAS employment rose 0.1% in August and has increased for 12 consecutive months, while the 15–74 employment rate was stable at 69.5%.
• BAS unemployment edged up to 5.3% in August from 5.2% in July, but remained below 5.6% a year earlier; registered unemployment with the PES continued to fall in September and weekly October data pointed to a further decline.
• LFS employment increased 0.8% quarter-on-quarter in Q3 and 1.4% year-on-year, lifting the employment rate to 69.6%, while LFS unemployment stayed near 8.7% because the labour force grew 0.8% quarter-on-quarter.
• Labour-force participation reached 76.2%, with the rate for people aged 16–64 above its previous 1990 peak; participation has risen especially among foreign-born people and those aged 55 and over.
• Foreign-born employment increased from 55% to 67%, but unemployment in this group remained around 16%, versus 6% for people born in Sweden, which raises the overall unemployment rate as their labour-force share grows.

Takeaway: Nordea expects BAS unemployment to keep falling into early next year before levelling off near 5%; employment plans are slightly positive, but persistently low vacancies and conflicting vacancy data make the strength of the recovery uncertain.