Jobless Growth Comes to Sweden?

Despite GPD growth above trend, the Swedish labour market has so far failed to recover. The debate on this gained new strength as business confidence weakend and household's inflation expectations plunged, according to a report released last week by the economic research institute NIER. The Central Bank, the Riksbank, was by NIER's head critizised for running a too hakish policy, a critique that the Social Democratic PM soon followed up upon. The PM was in his turn attacked by a prominent bank economist during the weekend, who blamed the PM's policy for hidering rather than stiumulating job-growth. Much the same ideas were echoed in the business daily DI's editorial this morning. Proposed measures by the goverment seem rather directed towards making the labour market statistics look better than actually making the labour market work better.

Interestingly, the critique sees based upon the ideas about changes in the business cycle presented in the paper by Grosher and Potter called "Has Structural Change Contributed to a Jobless Recovery?". Old sectors are shut down or offshored, and the job growth is created in new and developing sectors, Grosher and Potter shows. Updated statistics from Cleveland FED could be found here (thanks to the Big Picture for the link). The Swedish government does not at all try to enhance labour market efficiency to facilitate growth in new sectors; even worse, they are actively stopping private initiatives in the domestic service sector.

According to figures from Statistics Sweden, it is now make or break for jobless growth in Sweden. In their quarterly economic review, employment should pick up this quarter if its traditional link to GPD still holds. There is however scant evidence of this so far.