Summary. Labour market prospects for 2005 and 2006

Transcription

1 Labour market prospects for 2005 and 2006 Summary Global growth decreased There has been a high level of economic activity in the surrounding world in recent years. The world economy grew by a substantial 5 per cent in As before, economic growth in the world was driven by the United States and South-east Asia while the economy was slacker in large parts of Europe. In early 2005, an increasing number of indicators have shown that activity in the world economy is slowing down. In particular, there has been a further downturn in the euro area, especially in Germany and Italy. GDP figures for the fourth quarter of 2004 and the first quarter of 2005 show that growth in the United States has slackened as well, although from a high level compared with the EU. Against this background, growth in the global economy will decrease in 2005 to around 4 per cent. It is, of course, difficult to make an assessment for 2006 although the current indications predominantly indicate a slackening in the United States and Asia. The assessment is therefore made that world growth will decrease to around 3.5 per cent. Swedish growth changes down to a lower gear There are a number of indications that activity has slowed down in the Swedish economy. Our interview survey of almost 8,000 workplaces in the private sector shows that businesses have become less optimistic in their assessments of the future than they were in autumn It is primarily industry that has become more cautious in its assessment of the future. Besides our own assessment, both Statistics Sweden s activity index and the National Institute of Economic Research s business tendency survey point to a downturn, in the latter case primarily in industry. GDP growth also slackened off markedly in the fourth quarter of 2004, which, apart from a global downturn, has also been accompanied by surprisingly weak private consumption. There have been a number of indications in the first quarter of 2005 that show approximately the same rate of growth as the preceding quarter. In GDP growth was 3.5 per cent, which was the same rate that AMS (National Labour Market Board) forecast in autumn For 2005, we have adjusted GDP growth downwards to 2.8 per cent, which is still greater than in the majority of the EU-15 Countries. Sweden is not expected to obtain any assistance from the global economy and the fact that the euro area economies are sluggish leads us to conclude that GDP growth for 2006 will remain at 2.4 per cent. GDP growth was driven by a strong increase in productivity in However, since there were more working days during the year, the number of hours worked also increased. In our assessment, the increase in productivity will continue to make a substantial contribution to growth in both 2005 and In the light of the fact that the state of the economy is weaker than expected, we are adjusting employment downwards for 2005, from 25,000 to 17,000 persons (including the 1 There were 4 fewer workdays in 2004 and when Statistics Sweden adjusts for this, the increase in GDP is 3 per cent.

2 Career Break 2 ). For 2006, we estimate that it will increase by 33,000 persons, which accordingly means that approximately an additional 50,000 workplaces will be created in two years. Continued low labour shortage and low inflation Labour shortage is expected to remain at a low level throughout the forecast period. The cyclical downturn in recent years has meant that labour shortage has decreased to as low a level as in the crisis years of the 1990s. Our interview companies have reduced their recruitment plans since last autumn and a continued low proportion, 14 per cent, report a labour shortage. In the light of the fact that there is a downturn at the same time as there is a good supply of labour throughout Sweden among other things, a record large proportion or almost 25 per cent of all unemployed and programme participants have higher education we consider that there is very little risk that inflation-driving labour shortage situations will occur throughout the whole forecast period. In recent years, the Riksbank has overestimated inflation, which can be explained by the growth in productivity being underestimated, that price reductions of both imported and domestic manufactured goods have been greater than expected due to tougher competition and by the weak development of the labour market. This situation is expected to persist and we expect that consumer prices will only increase by 0.3 per cent in 2005 and by 1.1 per cent in 2006 as an annual average. This means that the rate of inflation will not reach 2 per cent by the end of 2006 but is expected to be around 1.5 per cent. The risk of inflation exceeding the Riksbank s target is slight even if the time horizon is extended to The low inflation and the weak development of the labour market means that there is a not insignificant scope for the Riksbank to reduce its key rate. According to the facts on which this forecast is based, we assume that the Riksbank will reduce the key rate by 75 points. Unemployment down to 4.5 per cent in 2006 Unemployment has been unchanged in the past year in seasonally adjusted figures. An initial increase in employment in the remainder of 2005 and a continued increase in 2006 will mean that unemployment will fall during the forecast period. The labour supply is not increasing to any great extent and there is therefore no significant upward pressure on unemployment. While there is a large increase in the working age population, the effect on the labour supply remains low. This is because the increase is taking place in ages with a low rate of participation in the labour force and a large part of the increase in population is among those born abroad, a group which has a low labour force participation rate. Moreover, exclusion of labour to disability pension continues to overshadow the positive population effect. We therefore calculate that unemployment will fall from 5.5 per in 2004 to 5.1 per cent in 2005 and to 4.5 per cent in This means that the relative imbalance rate (proportion of unemployed, including programme participants) changes to a limited extent in 2005 while it will fall more clearly in 2006, from 7.8 to 7.2 per cent. This is equivalent to a reduction from 346,000 to 323,000 persons. 2 Scheme trough which an employed person can take leave of absence for a year with 85 per cent of the remuneration that he or she would receive if unemployed., if a previously unemployed person takes his or her place at work. 2

3 During these forecast years, it is estimated that 2.7 per cent (121,000 persons) will participate in labour market programme measures, which is 0.3 percentage points higher than in The composition of the labour market requires measures The proportion of unemployed (including programme participants) whose labour market situation is difficult to solve is increasing. It is difficult to define the size of the group in a simple way since it does not necessarily have to be persons with long continuous periods of unemployment or those registered for long periods as unemployed or in programmes. The problem scenario also consists of persons who have worked part-time and by the hour for a long period and persons who alternate unemployment with short periods of employment. The group of persons described above who have difficulty in obtaining permanent employment is typically predominantly those with a short education. It includes young people who have not successfully completed compulsory school and women who do not have basic education and have lost their job, for instance, in the local government sector. The proportion of persons in the imbalance who have at most compulsory school education amounts to almost 30 per cent or 94,000 persons and we expect this proportion to increase in the next few years. Measured as a proportion of the labour force, this is a full 13 per cent which can be compared with almost 6 per cent among those with a higher education. Young people hard hit Unemployment affects young people aged under 25 particularly hard. In the past four years the relative imbalance rate increased from 11 to 17 per cent of the labour force among young people and the level continues to increase. The increase initially occurred mainly among young people with higher education but since early 2003, it has spread to young people with upper secondary and comprehensive school education. The relative imbalance rate among young people with at most compulsory school education is at presents over 20 per cent, which is more than a doubling in four years. Among those with post-secondary education, the relative imbalance is over 9 per cent, which can be compared to almost 5 per cent at the start of the twenty-first century. Women s labour market situation deteriorating women with short education particularly vulnerable There is a clear increase in the relative imbalance rate for women and the level has reached 8 per cent. For men, the corresponding figure has ceased to increase and is approximately 8.5 per cent. This means that the difference in level has decreased by two-thirds in less than a year. There is a lot to indicate that this development will continue and that the relative imbalance level for men and women will be close to one another before the end of the year, which is strongly correlated with the weak demand for labour in the public sector. The imbalance rate for women should in fact be even higher. However, unemployment has been kept down due to women having reduced their participation in the labour market, partly by exclusion to disability pension. The increasing deterioration in the labour market for women affects women with different levels of education very differently. The employment ratio for 3

4 women with at most compulsory school education is low, only around 58 per cent. This level is 13 percentage points lower than for men in the same educational group. The employment ratio for women is also lower in all age groups. Unemployment for those with compulsory school education is higher for women than for men in all age groups except 55-64, where the reverse applies. The latter is undoubtedly a result of the exclusion of women to disability pension. However, there are very small differences between the sexes in the employment ratio for those with higher education. This applies to all age groups except those aged between 20 and 24, where the level for women is considerably higher than for men. With regard to unemployment and the imbalance rate for those with higher education, the level is considerably higher for men than for women, however, and this applies for all age groups. Difficult to obtain a foothold in the labour market for non- Nordic citizens with a short education The labour market for non-nordic citizens has deteriorated for about a year and a half. The number of registered non-nordic citizens at the Employment Office amounted in the first quarter of this year to 57,000 or 23 per cent of the non-nordic population aged between 16 and 64, which is more than in the corresponding months in The increase in the number registered consists of men while there is some reduction in the number of registered non-nordic women (measured as a percentage of the population). The cause of this reduction is not an improved situation in the labour market, however, but a reduced participation in the labour force by women in this group, and, in particular, for non-nordic women. With regard to the non-nordic citizens, the proportion of unemployed (including programme) relative to the population is almost twice as large among those with at most compulsory school education than among those with higher education. For those with compulsory education, the level totals over 40 per cent, compared with approximately 20 per cent for those with higher education. An increasing number with occupational disabilities The number of registered unemployed with an occupational disability at the Employment Office is slowly increasing and now totals 121,000 persons, which is equivalent to approximately 38 per cent of the total number of occupational disabled persons in the labour force. The inflow of occupationally disabled persons to the Employment Office has not increased at the rate that was usual during the corresponding cyclical situations previously. An important reason for this is that many persons with an occupational disability and problems with ill health are on sick leave and/or have a disability pension instead. Programme measures in labour market policy are very important for the situation of the occupationally disabled in the labour market. Many disabled persons have subsidised employment or are covered by another type of measure. This has enabled unemployment to be kept down, and it now totals 21,000, equivalent to 6.6 per cent of the number of occupationally disabled, which, however, is about one percentage point higher than for the labour market as a whole. The rise in the number of registered persons with an occupational disability is distributed over both sexes although the trend is clearer among men. The explanation is that women with problems of ill health have to a greater extent transferred to sick leave and/or disability pension. This is also an important reason why the proportion of registered unemployed with an occupa- 4

5 tional disability in relation to the labour force is considerably lower among women than among men. Industry continues to rationalise Activity in industry has steadily increased although the rate of increase has been reduced. The order inflow continues to rise although not to the extent expected by businesses in the last three quarters, according to the National Institute of Economic Research s business tendency survey. This picture is also confirmed in our interview survey. This means that industrial companies have become more cautious in their future assessments which not least has an impact on their plans to recruit new staff and increase employment. The recruitment that takes place is largely short-term employment. Rationalisation and efforts to reduce costs will continue to affect the situation in the industrial sector and we expect that there will continue to be substantial redundancies during the forecast period. According to our interview result, employment will continue to decrease at least for the coming year. In 2005, the number of employed decreases by 4,000 persons while only minor changes takes place during It is mainly companies with more than 100 employees who are planning for fewer employees. Many large companies lease labour from staffing companies and buy services from consultancy companies, so that a part of the increase in employment is assigned in purely statistically terms to the private service sector. Labour shortage is expected to be low. Shortages will most likely occur in particular occupations, which are in demand by many employers such as CNC/NC-operators, qualified welders, lorry and car mechanics and toolmakers. Strong rise in the construction sector The situation in the construction industry has become brighter and our survey indicates a strong upswing. This is also confirmed by a number of other surveys. The development of demand in the past six months has been considerably better than a year ago, according to the companies assessments in our interview survey. Entrepreneurs have revised their expectations upwards for the next six months. The increased activity has also started to show in the employment statistics. According to the Labour Force Surveys, LFS, employment increased by approximately 10,000 persons during the first quarter of 2005 (compared with the same period last year). The companies make the assessment that the number of employees will continue to increase both over a period of one and two years. It is in particular companies with fewer than 50 employees which are expansive in their new recruitment plans over a one-year period. Large companies, with more than 500 employees, do not expect any increase, however in the number of employees. The construction companies have little spare staff capacity to meet increased demand, which vouches för a continued increase in employment. We estimate that the number of employed in the construction industry will increase by 8,000 in 2005 and by 6,000 in As before, there are large regional differences and new jobs are mainly created in large and medium-large cities. The construction sector is the area that shows the highest labour shortage according to our survey results, over 20 per cent state that there is a labour shortage. At present there is a shortage in some crafts and there is a risk that this shortage will increase unless additional training is provided. There is also a risk of shortage in construc- 5

6 tion occupations proper in particular in certain regions, and here too training measures but also geographical mobility are important. More employment opportunities in the private service sector There is a high level of optimism about the future in parts of the private service sector. Contract activities are clearly in a cyclical upswing. The structural crisis of the IT sector is largely over, the increased housing construction benefits the labour market for architects and construction consultants, and the generally reinforced activity in the Swedish economy has led to increased demand for financial and marketing consultants. Every other contract company in our interview survey expects an increasing order inflow in the next year and less than five per cent expect a downturn. The majority of workplaces although to date with the exception of those in computer consultancy operations express satisfaction about contract volumes and likewise with profitability. The use of capacity has increased step by step both for equipment and personnel and is now at the same levels as during the previous upswing. In the first quarter of ,000 persons worked in contract activities, which is almost 20,000 more than year previously. The representatives of the retail trade are also optimistic about the future. Almost every other retail trade company in the business questionnaire expects demand to increase in the coming year. The trade for durables is also going well in 2004 the sales volume increased by 5.8 per cent 3 and consumption was targeted most on shops selling electronics, furniture and clothes. Companies selling durable products believe in a continued good development and expect the number of employees to increase. However, the development of the trade for everyday commodities is fairly weak. Haulage companies benefited from a continued upswing for industry and construction and we expect more employees in the next few years. Sales of personal services have developed weakly, however, since households have prioritised other kinds of consumption, and this has also had an impact in negative employment figures in the sector. We expect the total number of employees in private services to increase by just over 15,000 persons in 2005 and that the increase will be as large in Local government financial results better than expected The financial reports for the municipalities and county councils in 2004 were clearly better than expected. Instead of billion deficits which many had anticipated, there was surprisingly a surplus of over SEK 2 billion. Underlying this relatively good result are substantial cutbacks, however, which is also reflected in a reduction in the number of employees. Tax increases, the low level of interest rates and some one-off income also contributed to the positive result. The coming two years thereby look considerably brighter for the municipalities and county councils and a slightly improved labour market is expected to increase the tax base in coming years. Moreover, the local government sector will receive additional resources in the form of increased general government grants, targeted grants and grants for educational initiatives. The uncertainty about the economic prospects (central government assistance) for 2007 and 2008 can, however, lead the municipalities and county councils to be cautious about using additional funds to expand activity, 3 According to the Swedish Research Institute of Trade. 6

7 due to a fear of incurring costs that they cannot bear after It is therefore difficult to assess the affect on employment. In the light of stronger local government finances, certain special measures and the effect of the Career Break, we expect that employment will increase in 2006 by almost 13,000 persons after a fall of 4,000 persons in the current year. The metropolitan regions lead the upswing in the labour market The largest part of the additional employment is expected to be in Stockholm and Skåne. Västra Götaland is at present in an employment downturn although an upswing is expected in In 2005, there are considerable differences in the development of employment between different counties in different parts of the country due to their being in different phases of the business cycle, and to differences in the corporate structure between counties. The counties in Småland are rather more cautious in their assessment of future employment in this forecast compared with the previous forecast, which is partly related to the slackening-off in industry. There are some counties where the labour market is dominated by structural changes, in particular in industry, leading to large-scale redundancies, such as Blekinge, Örebro, Västmanland, Gävleborg, Jämtland and Västernorrland. There has been a downturn in employment in all these counties and the weak development also affects the employment figures for Employment is expected to increase in 2006 for most counties in Sweden. Only two counties expect some reduction in employment next year, Blekinge and Västerbotten. However, in Blekinge the reduction decreases towards the end of the year while it increases in Västerbotten. Selected indicators GDP, at market price, percentage change No. of hours worked, percentage change Increase in productivity, percentage change UND1X, inflation, annual average, percentage change Hourly wage, percentage change Household real disposable income, percentage change Private consumption, percentage change Saving ratio, including occupational pension (ratio priv. cons.) Municipalities result in SEK billion Economic Report, May 2005, Swedish Association of Local Authorities and Regions. 5 Result before extraordinary expenses. Source: Kommunförbundet. 7

8 Key ratios 6 Thousand persons Change Outcome Forecast Outcome Forecast Labour force Employed Unemployed Per cent of labour force Labour market programme measures Per cent of labour force Imbalance in % of labour force The labour force is the total of employed and unemployed, and the imbalance is the total of unemployed and participants in labour market policy programmes. The totals do not always agree due to rounding-off. 8