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Sweden: Weak labour market data – TD Securities

According to Jacqui Douglas, chief European macro strategist at TD Securities, today’s labour market data of Sweden was exceptionally weak, with the unemployment rate jumping from 7.2% to 7.4% in August (mkt 6.8%).

Key Quotes

“The u-rate was sitting at 6.0% as recently as April; while the data can volatile, and especially so in the summer months, this trend goes well beyond choppy data.”

“In fact, the rise in the unemployment rate is on par with the speed of deterioration at the beginning of the financial crisis, and the banking and housing crisis in the early 1990s. This doesn’t mean that it’s bound to continue in that direction, but it is shaping up to be more serious than the rise in the unemployment rate that we saw in 2002-2004 that did not result in a recession.”

“We see two main takeaways:

  • While the Riksbank was surprisingly hawkish at its last meeting, we believe that it will have to back away from its plans to raise rates around the turn of the year.
  • It’s worth keeping a closer eye on the housing market going forward, after the unrelenting rise increase in debt/income ratios over the last several years. Job losses raise the risk of an unhappy ending to the housing market run.”

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