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UPDATE 1-Swedish unemployment jumps in April, rate path eyed

Published 05/25/2010, 04:51 AM
Updated 05/25/2010, 04:55 AM

* Surprise month-on-month jump in jobless rate to 9.8 pct

* Analysts had seen unemployment easing to 9.0 pct from 9.1

* Govt under pressure on jobs ahead of September election

* Analysts say jobs figure could call for Sept rate hike

(Adds detail, background, analyst comment)

STOCKHOLM, May 25 (Reuters) - Sweden's unemployment rate surged unexpectedly in April, pouring cold water on hopes for a swift rebound in the labour market ahead of the September elections and sending the crown down versus the euro and dollar.

Unemployment, which analysts had expected to drop slightly to 9.0 percent from 9.1 percent in March, in fact rose sharply to 9.8 percent in April, the statistics office said on Tuesday, catching the market off guard.

The centre-right Alliance government, under pressure to prove it can deliver on campaign promises of creating jobs, has fallen further behind the centre-left opposition in recent polls with less than four months to go to the national vote.

"Of course, if it should turn out that the labour market is changing from an improving trend to moving sideways or even deteriorating, it could be a factor (in the election), but it's too early to make that call," Danske analyst Michael Grahn said.

Reacting to the drop, the Swedish crown slid to its weakest level against the dollar since May 2009. It was trading at 8.04 per dollar at 0745 GMT after reaching a low of 8.05. This was the weakest since May 2009 when it fell as far as 8.08.

"The market is pricing out the risk for raised rates at the end of June, which is reflected in the crown," said Henrik Gullberg, an analyst at Deutsche Bank.

In comments ahead of a July 1 meeting, the Swedish central bank has been leaning toward raising its key policy rate from a record low of 0.25 percent for the first time in almost two years, citing improvement in the outlook for jobs.

But with the scenario for a quick labour market turnaround now in question, analysts said there was more weight behind arguments to delay the first hike until September.

"We have been of the opinion that unemployment has reached a turning point now, and this naturally raises some questions marks regarding that view," said Olle Holmgren at SEB. "On the margin, this could affect the rate path."

SCB said total employment, which does not include government job schemes, was 4.465 million versus 4.449 million in the previous month.

(Editing by Ron Askew)

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