Published 20 April 2010

Analysis of the economic development in Sweden's local labour market regions 2008-2011

A documentary report

The strong decline of the global economy triggered by the financial crisis of 2008 meant that Sweden’s economy ended up in a deep recession. The National Institute of Economic Research (KI) estimates that the gross domestic product (GDP) will have decreased by 4.4 per cent in 2009. KI believes that GDP will grow in 2010 and 2011 as a result of a stronger economy in the surrounding world and an expansive economic policy. In spite of this, KI believes that unemployment will continue to rise in 2010 and 2011.

The sectors most affected by the deep economic decline are primarily businesses in the input goods industry and the capital-investment goods industry. The regions in which these industries play a major role are also those where unemployment has grown the most, including the functional analysis (FA) regions of Värnamo, Eskilstuna and Trollhättan. In general, unemployment increased the most for men, which reflects the strong decline in production and employment being concentrated to the male-dominated manufacturing industry. In 13 of a total of 72 functional analysis regions, unemployment increased more in 2008-2009 than it did during the deep crisis of 1992-1993.

To assess how the recession has affected and will affect regional development for the entire period of 2008-2011, model-based results are used from the rAps multiregional model, where the model was calibrated so that the added value development on an industry level agrees with KI’s assessments.

A model-estimated change in unemployment in 2008-2009 exhibits a regional pattern that largely matches the Public Employment Service’s statistics on the change in unemployment on a regional level. The estimated change for 2009-2010 means that the largest increase in relative unemployment will take place in Västmanland, Dalarna, Blekinge, Jönköping, Kalmar, Kronoberg and Västernorrland. In addition, Stockholm, Uppsala, Malmö, Halland, Värmland, Örebro and Jämtland are the counties in which unemployment is estimated to increase relatively moderately.

How employment in Sweden’s functional analysis regions is affected by the economic decline is also illustrated by a comparison with an estimated neutral economic trend. This trend is based on assumptions from the Long-term Survey 2008 regarding average annual growth until 2030. For 2008, these model estimates indicate that a neutral economic trend for the country in total would entail a somewhat lower overall employment rate than KI’s assumptions indicate. However, for 2009-2011, a neutral economic trend entails significantly higher employment figures, such as more than 150,000 people employed in 2010. This pattern also applies to the majority of all functional analysis regions, particularly the regions where the input and capital-investment goods industries account for a large part of the region’s decrease in employment. For example, the estimate for the functional analysis region of Västerås indicates an employment figure of just over 6,000 people more in a neutral economic trend than the trend indicated by KI’s assumptions. However, for some ten functional analysis regions, the estimates indicate that the neutral economic trend would result in less employment. Among these are Torsby, Filipstad, Ljusdal, Kramfors, Pajala and Jokkmokk, for example. In these cases, the results may possibly indicate that the economic impact on employment in these regions is relatively small at the same time that these regions are expected to have long-term structural problems with regard to the composition of enterprise.

According to statistics up to and including 2009, unemployment increased more for men than for women, which is related to the economic decline primarily affecting the manufacturing industry. For the entire period of 2008-2011, the results from the model estimates show that the proportion of men among the employed decreases somewhat, and that the proportion men among the unemployed increases during the period. This pattern applies to both the estimated trend according to KI’s assumptions and to the neutral economic trend according to assumptions based on the Long-term Survey 2008. As expected, the proportion of men decreases somewhat more in the former case, which entails a more distinct decrease in the number of people employed in the manufacturing industry. According to KI’s assumptions, the GDP of 2011 will end up somewhat higher than that of 2007. The increase in GDP is estimated to be solely due to an increase in the metropolitan regions of Stockholm, Gothenburg and Malmö, where the gross regional product (GRP) in the Stockholm region is estimated to increase more than the national GDP. Compared with a neutral economic trend, there is some redistribution of GRP between functional analysis regions, with somewhat higher proportions for the likes of Stockholm and Malmö and lower proportions for regions such as Västerås, Trollhättan, Gothenburg, Östergötland, Värnamo and Jönköping.

Analysis of the economic development in Sweden's local labour market regions 2008-2011 A documentary report

Serial number
WP/PM 2010:03

Reference number
WP/PM 2010:03

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