Labour market outlook for 2005

Transcription

1 Labour market outlook for 2005 Summary Slowdown in growth in the global economy The global economy has continued to strengthen, and the driving force behind it is the USA and Southeast Asia. The improvement has been much more modest in Europe, where the economic picture is divided. While economic performance has been strong in countries such as Sweden, Britain and many East European countries, Germany in particular has continued to perform poorly. This country because of its size is obstructing recovery in the EU and above all within the Euro zone. On the other hand, there has been a thaw in France. There are now clear signals that economic activity in both the USA and Southeast Asia is moving into a quieter period. This means that growth in the world economy will slow down in the coming year from almost 5 per cent in 2004 to slightly more than 4 per cent in In our view, Europe will not take over the role of driving the world economy next year, owing among other things to the weak dollar and the recession in Germany. All in all, this means that GDP growth within the EU will stay at about 2 per cent in both 2004 and There are several factors threatening the relatively bright global picture that is outlined and, as in previous years, these are primarily the imbalances in the US economy, the price of oil and the risk of new terrorist attacks. The current oil price does not represent any great threat to activity in the world economy, but should the price again start climbing to new record levels it could be a serious threat to global growth. A greater threat, however, may be a further fall in the dollar, which would do more to erode the competitiveness and profitability of European and Southeast Asian export industries. A pronounced disruption of the inflow of foreign capital to the USA could press the dollar down sharply and that would also push up interest rates in the USA, which in turn would have a tangible effect on households purchasing power, as American households are greatly burdened by debt. Strong growth unchanged in Sweden next year The Swedish economy has done better than we predicted in our last forecast. This has to do with unusually strong growth in exports and the fact that households continued maintaining a good level of private consumption. Investments have also been up, after several years of falling investment levels. The results of our interview survey among workplaces show that companies have a very strong belief in prospects for the coming year. They are expecting steady growth in demand for goods and services, and optimism has also more or less spread to the entire private sector. The weakening dollar and the slowdown in the rate of growth taking place globally will dampen Swedish export growth next year, while at the same time imports will rise. This means that exports contribution to GDP growth will subside gradually. Instead, we expect the investment cycle to be markedly boosted in 2005, partly through more investment in industry and partly

2 2 through a steady increase in new housing production. We also believe that private consumption will intensify further next year. Households will experience a welcome rise in income, while at the same time their financial position will be further strengthened and that, together with a strong belief in the future, indicates that households will cut down on savings in favour of consumption. The strengthened temporary employment subsidy of SEK 6 billion in 2005 and SEK 1 billion in 2006 means that public spending will be somewhat higher than we forecast in spring On this basis, we estimate the GDP growth rate at 3.6 per cent in 2004 and 3.7 per cent in New jobs are on the way but productivity growth is high Our interview survey breathes optimism, and companies are planning for more employees in both one and two years time. According to the survey, many workplaces are using their workforce to full capacity, and in order to increase production/sales will have to augment their staff. Industry s capacity utilisation is furthermore at record-high levels, which should result in a marked expansion of production capacity. The current year is a lost year as far as employment is concerned and we estimate that employment will be reduced by persons. However, the improvement in the recruitment situation expected next year means that employment is estimated to increase by persons. It is workplaces with fewer than 50 employees that are expected to account for the entire increase in employment, or 95 per cent, while workplaces with 100 or more employees are planning further staff cuts. To date, GDP growth has been driven solely by strong production growth, while the number of hours worked during both 2002 and 2003 made a negative contribution of 1.2 and 1.3 percentage points respectively. During the fourth quarter 2003 an improvement in the trend of hours worked could be observed and in the second quarter 2004 a slight increase was noted. Behind this trend lay a fall in absenteeism above all in sickness absence. Overtime has remained at an unchanged level despite a strong production trend in the economy. During the third quarter there was yet again a weakening of the supply of hours worked but during the fourth quarter hours worked are estimated to increase markedly because there are more working days this year than last year, in other words a calendar effect. With regard to this, we estimate that hours worked will rise by 0.3 per cent between 2003 and Next year employment will increase and sickness absence decrease, while at the same time overtime will increase. This means that hours worked may rise by 0.7 per cent. It also means that growth in productivity will remain strong in 2005, even if there is a certain slowing down. The trend in labour supply is well in line with the description we gave in the previous forecast. The supply of labour increased up until late summer but has since fallen, mostly as a result of more persons in labour market policy programmes. In full-year terms that means a rise of persons. Next year we anticipate a slight increase of persons. The demographic effect amounts to persons per year if the calculation is based on the effect from Swedish-born workers as well as foreign-born workers (with a short period in Sweden). This then means

3 3 that the underlying increase in labour supply will be negative next year, which is connected with the continuing trend of large numbers of workers leaving the workforce on disability pensions and a certain increase in the number of persons in labour market policy programmes. Unemployment falls slightly good supply of labour over a broad field There was a marked fall in unemployment in autumn 2004, which is entirely connected with an increased volume of labour market policy programmes. The number of persons taking part in labour market policy programmes will rise from in 2004 to in This, together with increased employment, will lead to unemployment being reduced somewhat, with it being expected to fall from 5.5 per cent in 2004 to 5.1 per cent in The imbalance figure (unemployed plus programme participants) will thus change only slightly between 2004 and 2005, or from 7.9 per cent to 7.6 per cent. The low demand for labour in recent years has led to a large supply of labour throughout the whole of Sweden, even in historically strong growth regions, within a very broad spectrum of occupations. The good supply of labour also applies to occupations that require college or university qualifications. In the past few years, the supply of graduates has increased in all fields and there are now approximately graduates who are unemployed or participating in labour market programmes, that is to say more than at the beginning of the 1990s. A comparison with the situation at that time shows that we have never had such a broad supply of labour in terms of occupation and education, both at post-upper secondary school level and at graduate level. During the beginning of the 1990s unemployment was indeed higher overall, but it hit certain categories of occupations particularly hard, for example in building and industry. The current good supply of labour will create favourable conditions for increasing employment without causing disruption to the economy in the form of wage inflation. Inflation is currently low and is expected to average 0.5 per cent for 2004 calculated on the basis of the consumer price index, and UND1X (the index of underlying or core inflation) is estimated at 1 per cent. We expect to see large unemployed resources on the labour market in 2006 also. This means that there will be no reason from the labour market viewpoint to raise the Swedish Central Bank s key interest rate during the first half of 2005, but it can, in our view, remain unchanged until at least the second half of Industrial investment increases but limited number of new jobs Activity in industry has gone on steadily increasing, entirely due to major export successes. For the coming year, too, employers believe that demand will increase, but in their estimation this can happen without increasing the number of employees to any great extent. Previously, the industrial economy was strong only in the automotive, pharmaceutical and teleproduct industries, but the strong economic expansion has now spread to several areas, including the iron and steel industries. To this is added a major export demand for raw materials, which has benefited the mining industry. It is above all the rapidly growing demand from, among others, China and India that is benefiting basic industries and prices have risen markedly, including the price of

4 4 steel. Industry has met the increased demand without needing to resort to either hiring new staff or overtime. This has led to unusually strong growth in productivity by both historic and international standards. Work productivity increased by all of 11.5 per cent during the second quarter 2004, which means a rise from 7.6 per cent from the fourth quarter 2003 and from 9.8 per cent during the first quarter this year. According to our estimates exports will increase by more than 10 per cent between 2003 and 2004, owing to the fact that Swedish industry has a favourable export mix and is very competitive, this latter enabling industry to win market shares. Next year there will, however, be a dampening of export growth, primarily because growth in the global market will slow down. Industry has record-high capacity utilisation, or a little over 90 per cent, and everything indicates a powerful expansion of capacity next year. According to AKU, the fall in employment has stopped and turned into a slight rise. We expect this tendency to continue but to begin with recruitment will be held back through an increase in overtime. This means that employment will fall by persons this year while we expect it to increase by persons in Many large corporations are hiring in workers from staffing agencies, so that some of the employment increase falls purely statistically on the private services sector. Building sector in powerful upswing Optimism in the building trade has been rising steadily and companies believe 2005 will be a good year for the industry. Several factors are combining to create this view. Housing production rose sharply during the year s first three quarters or by 37 per cent, and the number of units where construction commenced will be considerably higher than anyone had predicted in previous forecasts. We estimate that building started on units in 2004 and that will start construction in We also expect RRE activities (repairs, rebuilding and extensions) to increase, likewise the industry s investments in buildings. The construction sector is also doing well, through major infrastructural investments. It is really only office building that is moving slowly because of the continuing high vacancy rates in office premises. The regional picture shows that activity in the building trade is increasing in large parts of the country. Some parts of Norrland county above all can, however, expect to see a difficult labour market for the building sector. Employment has risen slightly and building companies expect to increase the number of employees in one year s time. Unemployment in the building trade has only fallen slightly and the imbalance figure is 10 per cent of the members of the building workers unemployment insurance scheme. There is worry at Byggnads, the building workers union, that some jobs are going to foreign workers, but we have no statistical data to confirm this. The problem of recruitment is relatively limited, but despite that our interview survey shows that shortages are high among all branches of the building trade. We expect employment in the building sector to increase by persons in 2004 and by persons in This means that unemployment in the building trade will fall somewhat, while at the same time recruitment problems are expected to increase.

5 5 Increased activity on a broader front in the private services sector Optimism in the private services sector has been increasing and broadening. This time there is a dawning or growing belief in the future within virtually the whole of the private services sector. There has been an upturn in the market for IT consultants and the formerly very marked fall in employment has turned into a slight increase since the previous forecast. Profitability has also improved and companies believe they will see a definite increase in demand during the coming year. Companies are planning to take on more staff in 2005, and other commissioned work has also noted a steady improvement. The number of employees has increased somewhat and companies see bright prospects for the future. They are also planning to increase the number of employees during the forecast period. For the current year the supply of labour is relatively good and we do not expect to see recruitment problems increasing appreciably one year ahead. In the longer term there is, however, concern among companies with regard to the labour supply in IT, technology and engineering. The retail sector is optimistic about future prospects, although parts of the industry are cautious in their employment estimations. This caution attaches primarily to the grocery trade, where more large stores which require few staff are growing at the expense of small shops. The specialist goods trade is doing well and consumption is principally taking place in shops selling electronic goods, home furnishings and equipment and to a certain extent clothing and sports equipment. The mail order trade is also doing well. Companies in the specialist goods trade believe the positive trend will continue and expect to take on more staff. The wholesale trade is moreover positive and the entire wholesale trade is now doing well, which will give rise to new jobs. Haulage firms became considerably more positive about the future during the autumn, which is bound up with the fact that they are benefiting from strong industrial growth and an improved economic situation in the building trade. They, too, expect to increase the number of employees. Employees in the public transport sector will in our opinion remain roughly unchanged during the forecast period, while air traffic will continue to pull down the workforce figures. There may be some staff cuts in the post and telecom sectors while progress will be somewhat more positive in the hotel and restaurant trade. We expect the total number of persons employed in the private services sector to fall by in 2004 and increase by in Improved situation for local government The public sector shows differing trends depending on which statistical source is used. The survey we have done of the primary municipalities and county councils indicates that the number of employees has fallen. In autumn 2004 there were fully fewer employees than in autumn The short-term employment statistics show an even bigger drop, while employment changed little in the labour force survey. The financial position of local authorities has improved greatly and raised government subsidies have also added to that. Local authorities nevertheless expect to reduce the number of employees involved in caring for the elderly and disabled, and owing to the demographic change among schoolchildren the number of teachers in the nine-year compulsory school system will be cut in In childcare and upper secondary schools, local authorities expect to increase the number of employees, however. County

6 6 councils expect to employ fewer staff in hospitals, while the number of employees in primary care and dental services will remain unchanged or rise slightly. Next year the sabbatical year scheme (enabling some unemployed to get work experience by replacing employees for a year) will produce a positive employment effect for the public service sector and we expect employment to rise by close on persons. Most growth in major cities Two-thirds of the increase in employment next year is expected to arise in the metropolitan areas of Stockholm, Gothenburg and Malmö. That is a larger part than their share of total employment, which means that other parts of the country will lose ground during the coming year. Traditional growth industries are now experiencing an upturn, which is benefiting the metropolitan areas. The ever stronger industrial economy is also carrying with it a strong rise in employment in the three Småland counties of Jönköping, Kronoberg and Kalmar. In all forestry industry counties increased employment is expected, with the exception of Västernorrland county. The reason for the latter is that major job losses in industry will be realised and that a hospital will be closed down. Repercussions from the major job losses in industry will also mean reduced employment in the counties of Södermanland, Östergötland and Gotland, among others. Poor labour market trend for women The labour market for women has worsened considerably compared with that for men. Women s participation in the labour force has fallen, the employment rate trend has been poor, and the relative imbalance figure has increased. This trend in women s employment means that the gap in the employment rate between the sexes is great and will probably increase further (excluding the effect of labour market policy programmes). The direct reason for this is primarily the worsened labour market in the public sector but also that women s jobs have disappeared from industry and the private services sector. In all these sectors the proportion of women workers has fallen. The proportion of women among workers employed in industry has not been so low since the mid-1970s. The only sector where the proportion of women workers is on the increase is in the building trade, but that is taking place from a very low level. One factor that is statistically improving women s employment situation is the introduction of the sabbatical year, which in practice means that more people can share jobs. Difficult situation for large groups of non-nordic citizens The number of non-nordic citizens registered as jobseekers began to increase in autumn 2003 and that tendency strengthened in The rise comprises both men and women, of all ages and at all educational levels, although it is most marked among women. The worsening that took place in the labour market situation previously gave rise to an increase in the number of long-term unemployed among non-nordic citizens, but since spring 2004 the level has been reduced through labour market policy programme initiatives. On the other hand, the number of long-term registered jobseekers among non-nordic citizens is beginning to rise. Unemployment is very high among many groups of persons of foreign origin and particularly among those who have lived in Sweden for less than five years, where it is a full 20 per cent. Broken down by

7 7 country, there are examples of groups of people in this category where the unemployment rate is over 40 per cent. Ever larger numbers of young people with low educational qualifications among registered jobseekers A large and growing problem is the very much worsened labour market for young people with low educational qualifications, a trend that the Swedish Labour Market Board (AMS) has warned of in several previous forecasts. The imbalance figure among young people leaving school at age 16 has in the past few years increased from 8 to fully 13 per cent of that educational group in the population. The level is somewhat higher among young men than young women, but is rising rapidly for both sexes. The change means that the proportion of 16-yearold school-leavers among young people registered as jobseekers is on the way to increasing markedly. In autumn 2004 almost 17 per cent of those registered were only educated up to age 16, which can be compared with approximately 12.5 per cent at the turn of the millennium. This trend is a result of the worsened labour market situation in combination with the fact that a large group of young people are leaving school without completing their education. We estimate that the proportion of registered jobseekers with short or incomplete schooling will increase further during the coming year. Young people with this educational background run a very great risk of landing permanently outside the labour market or in the borderland between unemployment and working life. Among 16-year-old school-leavers and those with low educational qualifications there is a considerable element of non-nordic citizens. This group s labour market situation is affected negatively by the fact that many have insufficient educational qualifications. The number of non- Nordic young people without an upper secondary school-leaving certificate (at age 19) is very large: almost 40 per cent had failed to reach this goal within a four-year period after commencing upper secondary school. Among young men the proportion is higher than young women. Among jobseeking youth with non-nordic citizenship, the proportion of 16-year-old schoolleavers is approximately 45 per cent, which well reflects the above figures reported by the schools. We expect this situation to be permanent and that the initiatives within adult education to cut this figure will not improve the picture as regards this problem. Educational failure for this group demands a major effort in terms of labour market policy. Exclusion of many from the labour force remains unchanged The number of persons in the labour force is being kept back by a large proportion of people excluded from the labour force owing to early retirement on grounds of ill-health. The number of persons receiving disability and sickness pensions has increased steadily in the past seven years. In October 2004, there were persons receiving a sickness or disability pension, which was more than in the same month in The number of new disability or sickness pensions awarded has increased in the past year, which has among other things had the effect that the number of persons on long-term sick leave, that is to say over a year, has fallen to This means that in total there are fully persons claiming disability pension or who have been on sick leave for more than one year. The number of persons on short-term sick leave continues to fall, which means that the total number of persons on sick leave for one year 1 According to the National Social Insurance Board.

8 8 has fallen by 14 per cent to In the past few years, the number of people excluded from the labour force has overshadowed the demographic addition from the increase in population and the changes in the population structure. We estimate that the number of people excluded from the workforce will be greater than the demographic addition also in This on-going erosion of the labour supply is serious, since the potential supply will be limited in the long term. Number of registered jobseekers with occupational disabilities is increasing The number of people registered with the Employment Service who have an occupational disability is rising and is estimated at approximately , or about 33 per cent of the total number of occupationally disabled in the workforce. However, the rise has been lower than the normal during an economic downturn. An important reason for this is that many people with occupational disabilities and ill-health problems have gone onto sick leave on sickness benefits and/or early retirement with a disability pension. The increase in the number of registered jobseekers with occupational disabilities includes both men and women, although the rising trend is more noticeable among men. The reason for this is no doubt that it is more common among women with ill-health problems to go onto sick leave with sickness benefits and/or disability pension. It is also an important reason why the number of registered jobseekers with occupational disabilities in relation to the workforce is considerably higher among men than women. A high proportion of occupationally disabled jobseekers registered with the Employment Service have low educational qualifications. The number of long-term unemployed risks rising next year In the spring forecast, we warned that the number of long-term registered unemployed would begin rising during the autumn and that estimation appears to have been correct. We believe there is a danger that that will rise during the forecast period. Labour market policy initiatives do not disrupt the time jobseekers are registered with the Employment Service, and since the demand situation has been weak, groups who have particular difficulty in finding a solution to their labour market problems have increased, a trend that will continue. The ever large number of groups who have difficulty in competing for the available jobs can point to an increasing number of long-term registered unemployed next year.

9 9 Selected indicators GDP, at market price, change as % Number of hours worked, change as % Productivity growth, change as % UND1X, inflation, annual average, change as % Hourly wage, change as % Households real disp. income, change as % Private consumption, change as % Savings quota, inc. collectively agreed occupational pensions (quota real disp. income) Municipalities results in SEK billions Key figures 3 Thousands of persons Change Outcome Forecast Outcome Forecast Labour Force Employed Unemployed % of LF Labour market policy programmes % of LF Imbalance as % of LF Result before extraordinary expenses. Source: Kommunförbundet. 3 The labour force is the sum total of employed and unemployed, and the imbalance figure is the sum total of unemployed and participants in labour market policy programmes. The totals do not always agree because figures have been rounded up or down.