The Swedish labour market has exhibited a more notable post-pandemic rebalancing when compared to Norway. It provides an additional rationale for the policy divergence seen across the two countries, and doubly so when comparing each central bank’s preferred measure.

• Alongside an easing in inflation pressures, the Riksbank have referenced a weakening labour market (rates were cut in May this year and a second is expected Aug 20).
• A “Sahm rule” calculation on the Swedish LFS unemployment rate (the Riksbank’s preferred metric) and the PES’s unemployment claims rate highlights this weakening.
• The LFS series has been above the 0.5 level since August 2023, while the PES measure rose to 0.42 points in June 2024 (the 0.5 level being purely indicative here with no precedent to suggest a recession per the US).
• In Norway, a Sahm Rule calculation on the Norges Bank’s preferred u/e metric – the registered u/e rate from the NAV – has moved a little higher in the past few months, but remains comfortably below the 0.5 handle. The rate itself is also below historical averages.
• NB has acknowledged that unemployment has risen from a very low level recently and doesn’t appear too concerned by the modest rebalancing. It has also attributed the sharper post-Covid move for the LFS u/e rate as the latter better capturing unemployment for 15-19 year olds.