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Free AccessMNI INTERVIEW: Riksbank Jobs Outlook Overly Optimistic: NIER
-Sweden Job Scheme Take Up Could Be Less Than Central Bank Sees: NIER
By David Robinson
LONDON (MNI) - The Riksbank may be underestimating the potential rise in
unemployment across Sweden following the Covid-19 outbreak due to more
optimistic assumptions of take up for the government's job support scheme, a
senior fellow at the country's leading economic research group told MNI.
The central bank sees unemployment at 9-10% this quarter, well below the
National Institute of Economic Research's forecast for unemployment to hit
11.5%, or over 15% in the absence of government support, although the Riksbank's
different set of assumptions make comparisons difficult, said Goran Hjelm, head
of the labour market division at NIER.
The official short-time working scheme, in place throughout 2020, allows
firms to lower employees' working hours while the government covers up to 75% of
wage costs.
The divergence between the Riksbank and NIER forecasts may be because "they
are assuming that companies will use the short-term work programme to a greater
extent than we have assumed," Hjelm said.
"We are explicit with our figures, but we haven't seen any figures from the
Riksbank," he added.
--IN FLUX
The government scheme, like similar programmes elsewhere, has also been in
a state of flux. The maximum reduction in working hours was temporarily raised
from 60% to 80% for the May to July period. NIER raised its forecast of the
number of people working short-time to an average 360,000 in the second quarter
while expecting usage to decline gently during the second half of 2020.
Together with different calculations regarding short-time work, Hjelm said
another explanation for the lower Riksbank forecast may be that it expects a
greater eagerness among companies to hold onto workers whom they fear may be
difficult to replace in a recovery.
"A second possible interpretation, and it is likely that there is some
truth in both explanations, is that the Riksbank is assuming that there will be
greater labour hoarding within the companies," he said.
Past experience has shown central banks tend not to publish labour market
scenarios that are at the more alarmist end of the spectrum. The Riksbank was
criticised before the crisis for earnings forecasts that repeatedly proved
overly optimistic.
From a policy perspective, the Riksbank is aiming to mitigate the major
negative effects from the unpredictable spread of coronavirus rather than fine
tune any response to the economic outlook guided by its own forecasts - a task
which Governor Stefan Ingves said recently would be almost impossible.
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: MX$$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.