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WRAPUP 1-Upbeat Sweden, Norway jobs data show recovery on track

Published 08/05/2010, 07:21 AM
Updated 08/05/2010, 07:24 AM

* Sweden June underlying unemployment down to 8.1 pct

* Sweden employment up yr/yr for 1st time since autumn 2008

* Norway Q2 jobless rate flat at 3.6 pct, lower than seen

* Swedish crown firms vs euro, Norwegian crown steady

(Adds background, details)

By Simon Johnson and Camilla Bergsli

STOCKHOLM/OSLO, Aug 5 (Reuters) - Better than expected employment figures in Sweden and Norway on Thursday suggested the economic recovery in both countries is gathering pace, increasing the likelihood of early interest rate hikes.

In contrast to many other European countries, both Nordic states were quick to recover from the downturn as their governments dug into deep coffers to boost domestic demand.

In recent quarters, a pick-up in global growth has helped Sweden's large export sector and Norway's huge oil industry has bounced back along with crude prices.

In Sweden, figures from the statistics office on Thursday showed underlying joblessness is falling faster than expected.

While the headline figure for June rose as students were included on the rolls for the summer, the rise was smaller than the market forecast. Stripping out this seasonal effect, unemployment fell to 8.1 percent from 8.7 percent the previous month and from 8.4 percent a year earlier.

The number of employed rose on an annual basis for the first increase since the autumn of 2008, while the hours worked also rose significantly for the first time in almost two years.

"The labour market in Sweden looks to be seeing a stronger development," Swedish Finance Minister Anders Borg told reporters. "This strengthens the view that we may have to revise down unemployment (forecasts)."

The government, facing an election in September, has forecast unemployment at 8.9 percent this year. [ID:nLDE6740KE]

The Swedish crown initially firmed after the data but came off highs to trade at 9.39 against the euro at 1042 GMT. The Norwegian crown was little moved by the data, mainly following global trends and trading at 7.887 to the euro.

NORTH STARS

The effects of the global financial crisis were mild in Norway and while the country rebounded quickly, the pace of recovery has slowed.

Thursday's jobless figures there, coupled with data earlier this week, offered evidence that the economy may be speeding up again.

Unemployment in Norway, the world's fifth biggest oil exporter and second biggest gas exporter, held steady at 3.6 percent in the April-June period. Analysts had expected a rise. [ID:nLDE6740MX]

Earlier this week, Norway's purchasing managers' index (PMI) rose to its highest level in two years while credit to Norwegian businesses increased for the first time since October 2009, raising hopes of an accelerated recovery. [ID:nLDE6711DT]

Norway's central bank was the first in the developed world to raise interest rates after the downturn. At its last meeting, Norges Bank signalled that it would not hike again until at least October, citing the country's stuttering recovery and euro zone debt risks.

The bank meets next week but analysts have generally not priced in another rate hike until around the turn of the year given forecasts for a still sluggish recovery.

Sweden has bounced back from its worst recession since World War Two, with the economy growing at its fastest pace in more than three years in the second quarter. [ID:nLDE66T0MG]

The country's central bank raised rates in July, the first time since the crisis struck the country in late 2008, and is widely expected to keep on hiking.

"The Riksbank is already determined to raise interest rates," said Tor Borg, economist at SBAB. "Our view is that they will hike by 25 basis points at every meeting (this year) now."

(Reporting by Mia Shanley, Johan Ahlander, Niklas Pollard, Anders Zachrisson and Sandra Jansson in Stockholm, Wojciech Moskwa in Oslo); Editing by John Stonestreet)

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