Swedish National Labour Market Board (AMS) Labour market outlook for 2006 Summary Good economic trends boost growth The economic outlook for Sweden has brightened since spring 2005. This means that the slowdown in economic growth in the winter of 2004/2005 was of a temporary nature only, as has been confirmed by, among other things, the results of our interview survey among 9 400 workplaces in the private sector. The principal explanation for this change is the improved international economy, with good growth in the United States and in Southeast Asia. As outlined in our previous forecast, there are worrying trends in the Euro zone, although we are now seeing positive signs of growth in the export sector. Households within the Euro zone are burdened with high unemployment and budget cuts and are thus choosing saving over consumption. There is hope of increased private consumption, although at present there are few tangible signs of it happening. This means that GDP growth in the Euro zone is estimated to remain at a weak 1.2 per cent in 2005 and 1.6 per cent in 2006. In the United States, growth is estimated at a good 3.6 per cent in 2005 and 3.4 per cent in 2006. The Asian countries are expected to continue showing strong growth in 2006 such as China, where approximately 9 per cent growth is expected which means that the global economy will continue growing at a good rate or by approximately 4 per cent in both 2005 and 2006. Economic growth in Sweden has increased since the fourth quarter 2004, with export industries handing over the baton to demand from the domestic market. Investment has shown good, steady growth while at the same time private consumption has strengthened, whereas public consumption has risen only slightly. This latter may be associated with the budget cuts that have taken place in the local government sector. The economic outlook for 2006 is good. Household income is expected to strengthen palpably in 2005 and 2006, and at the same time the labour market situation is brightening. Inflation will remain low and interest rates will rise only slightly, which should result in the optimism of the household sector being realised in an increase in private consumption. This latter increase may take place despite a continued high rate of saving. Investment will
remain strong next year, even if the rate of increase is reduced. This will include a slowdown in investment by industry. Conditions are also good for a marked increase in public consumption in 2006. Government subsidies to local government have increased markedly in 2005 but also for 2006, in addition to which the tax base will increase as a result of higher employment. All these domestic factors, combined with increased activity in export industries, indicate good economic growth. We estimate GDP growth at 2.4 per cent in 2005 and 3.3 per cent in 2006. A good 65 000 more people in employment next year Our interview survey shows a number of interesting results. One of these is that business and industry have become palpably more positive in relation to demand for goods and services compared with the previous survey in spring 2005. The other is that recruitment plans have now become more expansive after several years of low activity, with both the building and construction sector and the private services sector planning to take on more employees. We estimate an increase in employment of slightly more than 20 000 persons in 2005 and a further 65 000 persons in 2006. A very large proportion of the rise in employment is in temporary staff, while only a weak increase is expected in permanent positions. Labour force supply is more difficult than usual to estimate, and is connected with the reorganisation of the Swedish LFS (Labour Force Surveys). Usually, when employment starts to increase, the supply of labour also increases. This is because people who have been in education and who have chosen to extend their studies when there has been only a weak demand for labour now come onto the labour market to a greater extent. We expect this effect to have an impact on the labour force supply next year and that the increase will amount to 32 000 persons. Unemployment falls from 6.0 per cent to 5.2 per cent Unemployment is expected to fall significantly next year, due to increased employment but also to the fact that labour market policy programmes will be extended from 123 000 to approximately 160 000 persons. This increase will not, however, impact fully on employment and unemployment figures owing to a crowding out effect. We estimate unemployment at 272 000 persons, or 6 per cent, for 2005, and 238 000 persons, or 5.2 per cent, for 2006. The so-called imbalance figure (comprising unemployed plus participants in labour market policy programmes) will increase in 2006 by approximately 5 000 persons. This means that the imbalance figure will increase from 8.7 per cent of the labour force in 2005 to 8.8 per cent of the labour force in 2006. How- 2
ever, it is worth noting that almost the entire increase in persons involved in programme measures is classified as employment and in many cases this will probably result ultimately in regular employment. The high imbalance figures are found within a broad range of occupations, which means that recruitment problems can be kept in check next year also. As a result, we do not expect any appreciable upward pressure on wages but the rate of increase is expected to stay at approximately 3.6 per cent in 2006. The proportion of employers reporting labour shortages when recruiting staff has, however, begun to rise in parts of the private sector and amounted to almost 20 per cent in autumn 2005, as compared with 15 per cent one year ago. This increase in employers reporting labour shortages is found largely in the building and construction sector and in certain parts of the private services sector. Unemployed and type of programme action Unemployed Training programmes Percentage of labour force 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1992 1994 1996 1998 1993 1995 1997 2000 1999 Source: AMS Employment programmes 2002 2004 2006 2001 2003 2005 Employment expected to rise most sharply in Norrbotten Our interview survey shows that there is widespread optimism among enterprises throughout Sweden over a much larger and broader geographic field than for several years. For this reason, no overall geographic pattern is discernible as has often previously been found in the results of the survey, in other words no indication that the increase in employment will be concentrated to certain regions of the country. Judging by the responses to our survey, Stockholm, Uppsala and Norrbotten are at the top of the table with the most optimistic employers with regard to new job creation. The county labour boards in the three major counties predict an upswing in employment of approximately 1.6 per cent in 2006. Both Stockholm and Skåne expect to see rising employment growth. Västra Götaland is cautious in its forecast and expects a rise of barely 1 per cent, that is to say lower than the national 3
average of 1.5 per cent. Employment is also expected to rise in most of the other counties in Southern and Central Sweden (1.3 per cent excluding the three major counties) in 2006. The highest percentage increase in employment is expected in the counties of Östergötland, Halland, Kalmar, Uppsala, Jönköping and Örebro. A lower rate of increase is expected in the counties of Blekinge, Södermanland and Kronoberg. The counties of Gotland and Västmanland differ from the rest of Sweden and are expecting a largely unchanged picture in terms of employment. Employment is expected to rise by approximately 1 per cent in the forestry industry counties in 2006. The biggest rise in the country is expected in the county of Norrbotten, with an approximately 2 per cent increase. Behind this increase is a strong development in primary industry and new jobs in the building industry and parts of the private services sector such as commerce. The county labour boards in Dalarna and Gävleborg also expect to achieve the average increase in employment among the group of forestry industry counties. However, the county labour boards in Värmland, Västerbotten, Jämtland and Västernorrland expect employment growth to be below average. Strong building sector brings considerably more jobs in the industry The building and construction sector has strengthened considerably and industry representatives expect this trend to continue in 2006. Recruitment plans are expansive. In 2005 employment will rise by 10 000 persons and in 2006 by 12 000 persons. Recruitment problems have increased rapidly, with 27 per cent of the workplaces interviewed one year ago reporting problems to almost 40 per cent in autumn 2005. In our estimation, recruitment problems will increase further in the coming year and regionally they are already proving difficult to resolve. Primarily, a continued increase in house building is expected to further strengthen the building market, although a palpable increase in the construction sector will also contribute. The number of housing units that commenced building in 2004 was 27 600. In 2005 we estimate that the number will be 30 500, and 33 000 in 2006. Continued loss of jobs in industry although at a lower rate The slowdown in industry that took place at the end of 2004 proved to be temporary. In the past six months the industrial business climate has brightened once more. It is evident from our survey that industrial enterprises are considerably more optimistic than was the case six months ago. They are nevertheless planning for further job losses, although our survey shows that the rate of decline will slow in 2006. Recruitment problems within industry are limited, a situation which is expected to remain broadly unchanged during 2006. Regionally, however, recruitment problems may increase, primarily in the engineering 4
industry, although there is a large supply of unemployed skilled workers and engineers in Sweden as a whole. The volume of people training for industrial occupations is, however, low, which may lead to growing recruitment problems over a longer time perspective. Strong growth and new jobs in parts of the private services sector The private services sector is in an expansive phase. Within the entire sector, we expect employment to increase by 30 000 persons in 2006. Most of this increase is expected to be in the consultancy industry. Employers within this industry expect to see a sharp increase in demand for their services and there are also expansive recruitment plans. Parts of the retail sector are doing well particularly the specialist goods trade and a continued upswing in sales is expected. This is also in line with the forecasts that expect to see a good rise in household income in 2005 and 2006. The wholesale trade is furthermore developing well as a result of the strong building sector and strengthened industrial growth. In the grocery trade, large supermarkets and cut-price chains are, however, continuing to win ground, which is resulting in fewer employees. Overall for the retail trade we expect employment to increase slightly, although not in line with the expected increase in sales. The restructuring that has taken place in the banking and insurance industries has now moved into a quieter period and we expect to see largely unchanged employment figures, despite the fact that the sector is benefiting from increasing lending activity and increased sales of securities. Parts of the transport industry are doing well in the wake of a strong building sector and growing activity in the export industries. Also business and private travel are increasing, which is having a positive effect on rail and air traffic. The air transport industry is still in a restructuring process aimed at increasing profitability, which is impacting on the number of employees. Overall, we estimate that there will be slightly fewer employees in the transport industry. More jobs in municipalities, primarily through programme initiatives Our interview survey with representatives of the local government sector clearly indicates that the sector s recruitment plans for next year are only moderate. This may appear surprising in view of the fact that the economic position for the municipalities and county councils has been considerably strengthened, partly through increased government subsidies and partly through tax increases. Further improvement is also expected in the time ahead as a consequence of a strengthened tax base. To this it should also be added that the local government sector has already carried out major cost-cutting programmes, with fewer employees as a 5
result. We have therefore chosen to make a more positive estimation of employment in the local government sector in 2006 than the results of our survey might indicate. In our estimation we also include a positive employment effect gained through the introduction of plus jobs (subsidised jobs for long-term unemployed) and training substitute posts (subsidised temporary jobs in the health and care sector offered to the unemployed while the original job holders undergo additional training). In the central government sector a number of measures are being carried out including generation changeover, continued development of universities, and temporary resource contributions to several large central government authorities which should aid the creation of somewhat more civil service jobs in 2006. Overall, we estimate that the number of civil servants will increase by 28 000 in 2006. Young people with low educational qualifications are hard hit There are several groups who have more difficulty than others in gaining a foothold in working life. The conclusion we drew in our last forecast was that the proportion of unemployed (including labour market programme participants) who are experiencing problems in the labour market that are more difficult to resolve is on the increase. This trend has also been confirmed. One group that can be regarded as belonging to this category is young people who leave school at age 16 or who have dropped out of upper secondary school education. For this group of young people, in autumn 2005 fully 21 per cent of the labour force were unemployed or placed in programmes and that level is constantly rising. One group of young people who are finding it particularly difficult on the labour market are those born outside the Nordic countries. A strong contributory factor here is that many non-nordic young people fail to complete their basic education and frequently leave school without a school-leaving certificate or with low educational qualifications. A survey done by the Swedish National Agency for Education shows that approximately 37 per cent of all non-nordic young people have not received a school-leaving certificate four years after commencing their post- 16 upper secondary education. This can be compared with 23 per cent of Swedish-born young people. The foundation for the results achieved by young people in the upper secondary school is laid already in the nine-year compulsory school system, from which far too many emerge unqualified to apply for any of the national programmes. 6
High proportion of registered non-nordic jobseekers with low educational qualifications Labour market data illustrates major differences in the labour market situation depending on the level of education among non-nordic citizens. The proportion of non-nordic jobseekers with compulsory education registered with the Public Employment Service in relation to the rest of the non-nordic population at comparative educational levels in autumn 2005 was all of 44 per cent, i.e. almost half of that educational group are registered jobseekers. The level is twice as high as among non-nordic citizens with tertiary education. The labour market prospects for the mentioned group of persons with low educational qualifications are still very gloomy, the proportion of registered jobseekers is increasing rapidly and this applies to both men and women. The low educational background of these people demands major, long-term measures if they are ever to gain a foothold in the labour market. The negative trend for this educational group is causing an increase in the total number of registered jobseekers among non-nordic citizens. Registered jobseekers in the third quarter this year numbered 59 000 persons, which is one in four of the non-nordic population aged 16-64. The rise in the number of registered jobseekers has been greatest among men (measured as a percentage of the population). Statistical data (according to LFS) indicates that the reason why the number of female registered jobseekers has not risen as much is that many non-nordic women have left the labour force. Women with low educational qualifications hit hard by job losses The labour market situation for women has continued to deteriorate in line with the estimation in our last forecast. The rationalisation measures carried out in the past few years have in general hit certain female-dominated occupations hard, within local government, commerce, private services and industry. These measures have impacted principally on women with low education and training, as is evidenced by the fact that the relative imbalance figure is considerably higher among women than among men who left school at age 16. Women with low educational qualifications will in our estimation continue to find the labour market difficult during the forecast period. A certain easing-off in the labour market situation will, however, become noticeable in 2006 as a result of the improved economic position of local authorities, together with increased investment in labour market policies. For both those with upper secondary school education and those with tertiary education, the relative imbalance figure is lower for women than for men. In total there was a three-tenths of a percentage point difference between women and men in October 2005. This means that the difference has fallen by two-thirds in one year. There is much to indicate that this trend will continue during the forecast period and this conclusion is strengthened by the 7
fact that the relative imbalance figure is still increasing for women at all educational levels, while the tendency for men in these educational categories is the opposite. If this development continues according to our estimation, it will represent a break in the trend, i.e. the relative imbalance level of women will reach that of men within the next few months. Increasing numbers of registered jobseekers with disabilities The number of jobseekers with disabilities and reduced capacity for work registered with the Public Employment Service increased in 2004 and 2005. One reason for this is the stricter application of the rules regarding sick leave by the Social Insurance Office, as a consequence of which increasing numbers of people with functional disabilities and reduced working capacity have become registered with the Public Employment Service. During the third quarter 2005, a total of 125 000 persons with functional disabilities and reduced working capacity were registered with the Public Employment Service, which was 37 per cent of the number of functionally disabled in the labour force. The number of persons registered is clearly on the increase and this applies to both men and women. The proportion of men registered is considerably higher than the proportion of women. An important explanation for this is that many women with disabilities have gone onto sickness and activity compensation (formerly early retirement with disability pension). Fewer onto sickness and activity compensation The inflow of persons claiming sickness and activity compensation among the labour force is on its way to being reduced. During 2005, we estimate that approximately 12 000 persons from the labour force will claim sickness and activity compensation, which is a few thousand fewer than in 2004. At most, the inflow of persons claiming sickness and activity compensation was approximately 30 000 in 2002. In 2006 there will be a further reduction, which means a break in the trend in such a way that the flow into sickness and activity compensation will be slightly lower than the demographic addition to the labour force because of population increase and changes in the population structure. Challenges for labour market policy in 2006 In view of the factors described above, labour market policy will be faced with a number of challenges in 2006. Below is a summary of the principal challenges facing us in our estimation: 8
1. There will be a tendency to increases in shortages of qualified labour in the following occupational categories: - building and construction - ICT sector - regional/local shortages in occupations in the private services sector - some public sector occupations requiring college or university qualifications 2. Certain groups are finding it extremely difficult to get a foothold in working life a circle involving unemployment, short-term jobs (part-time, hourly paid work) and programme initiatives - Some groups of university graduates are registered as jobseekers for ever longer periods - Unemployment and imbalance are rising among young people with low educational qualifications all of 21 per cent of the labour force is in imbalance - High numbers of non-nordic citizens are registered jobseekers with low educational qualifications 44 per cent of registered jobseekers of the equivalent educational group - Women with low educational qualifications are hard hit lower employment rate, high imbalance figures and greater inflow to sickness and activity compensation - The inflow of persons from the labour force to sickness and activity compensation is still high, approximately 10 000 persons per year, although the number is falling - The number of registered jobseekers with functional disabilities and reduced working capacity is increasing 37 per cent of the functionally disabled workforce are registered as jobseekers New opportunities in labour market policy In 2006, the labour market will move into a new phase of development. The demand for labour is increasing and for the first time in several years we are predicting a sharp rise in employment. This development will give the Public Employment Service considerably better opportunities to employ its various labour market policy instruments more aggressively. Naturally, the focus will be on matching jobseekers with job vacancies. A development tendency we are seeing is that there is a risk of labour shortages increasing in some parts of the labour market. In such a situation, it is particularly important to have good contacts with employers, and in autumn 2005 the Public Employment Service 9
intensified its work on developing contacts with employers, an effort that will also continue through 2006. Close contacts with employers give the Public Employment Service better opportunities to facilitate the matching process between job vacancies and jobseekers/unemployed, all in order to avoid labour shortage situations, which can have serious consequences for production, wage formation, etc. In the case that there is a shortage of jobseekers locally and where there is no possibility of resolving the shortage by people commuting or moving to a new location, labour market training is an important programme initiative to which the Public Employment Service may have recourse. The low demand for labour in the past few years has meant a considerably more difficult labour market situation for more groups of unemployed and more and more people have suffered long periods of unemployment. There is even a risk that this worrying picture for groups of unemployed will worsen next year unless labour market policy efforts increase. However, in 2006 our opportunities for making it easier for these groups of unemployed to gain a foothold in working life will be increased, initially through the increased demand for labour but also through extended opportunities within the framework of the labour market policy programmes. The labour market policy programmes will have a new focus in the direction of employment programmes, that is to say a more offensive focus aimed at getting the unemployed into work, while at the same time the programmes will be extended to include an average of 40 000 more participants per month compared with 2005. This increase will involve developing employment subsidies in order to facilitate and stimulate new recruitment, but the subsidies will also enable the Public Employment Service to influence the choice of who the employer recruits. The increase will also include new programme initiatives aimed directly at groups of unemployed who have a particularly worrying labour market situation. Some examples of this are academic practice workplaces for categories of graduates who have been unemployed for a long period, apprenticeships for young people with low or insufficient educational qualifications, as well as plus jobs and training substitute posts for the long-term registered unemployed and those with low educational qualifications in public sector occupations. 10
Selected indicators 1 2001 2002 2003 2004 2005 2006 GDP, at market price, change as % 0.9 2.1 1.5 3.5 2.4 3.3 Number of hours worked, change as % 0.5-1.2-1.3 0.9 0.5 1.5 Productivity growth, change as % 0.4 3.3 2.8 2.6 1.9 1.8 UND1X, inflation, annual average, change as % 2.8 2.6 2.3 1.0 0.7 1.3 Hourly wage, change as % 4.4 4.1 3.5 3.3 3.3 3.6 Households real disp. income, change as % 3.8 0.9-1.9 1.2 2.7 3.6 Private consumption, change as % 0.4 1.4 1.5 1.8 2.3 3.5 Savings rate, inc. collectively agreed occupational pension (rate private consumption) 8.3 9.0 8.6 8.4 8.6 8.5 Municipalities results in SEK billions 2 1.3-7 -0.9 2 10 9 1 The figures are not corrected for calendar differences. 2 Result before extraordinary expenses. Source: Kommunförbundet. 11
Key figures 3 Thousands of persons Linkage** Change Linkage** Outcome Forecast Outcome Forecast 2001 2002 2003 2004 2005* 2006* 2001 2002 2003 2004 2005* 2006* Labour Force 4414 4421 4451 4459 4520 4552 +52 +7 +30 +8 +25 +32 Employed 4239 4244 4234 4213 4248 4314 +80 +5-10 -21 +21 +66 Unemployed 175 176 217 246 272 238-28 +1 +41 +29 +4-29 % of LF 4.0 4.0 4.9 5.5 6.0 5.2-0.7 0.0 +0.9 +0.6 0-0.8 Labour market policy programmes 112 117 92 107 123 162-1 +5,0-25 +15 +16 +39 % of LF 2.5 2.6 2.1 2.4 2.7 3.6-0.1 +0.1-0.6 +0.3 +0.3 +0.8 Imbalance as % of LF 6.5 6.6 6.9 7.9 8.7 8.8-0.7 +0.1 +0.3 +1.0 +0.4 +0.1 * NB. The Labour Force, Employed and Unemployed figures for 2005 and 2006 are not comparable with previous years because of the reorganisation of AKU (Labour Force Surveys). ** Linkage according to the Swedish National Labour Market Board (AMS). 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. 12