Jobless Rate Sends Krona Down as Agency Warns of Quality Issues

(Bloomberg) -- Swedish unemployment unexpectedly remained at a four-year high last month, sending the krona down as much as 0.5% against the euro and threatening the Riksbank’s plans to raise rates around the turn of the year.

But the September reading came with a big warning from the statistical agency that compiled it, casting doubts on the data’s reliability and on the central bank’s ability to accurately gauge the state of the economy as its next rate-setting meeting looms.

Statistics Sweden estimated the seasonally-adjusted jobless rate at 7.4% in September, unchanged from August and well above the 7.1% forecast by economists surveyed by Bloomberg. At the same time, it warned that it had identified “quality flaws” in parts of the data.

Specifically, a change in the way the data was collected in June 2018 caused some of the information gathered afterwards to be of insufficient quality, the agency said. This means “the outcome should be interpreted with caution,” since unemployment for September is overestimated and employment is slightly underestimated, it said.

Johan Lof at Handelsbanken welcomed that Statistics Sweden addressed the issue and was “being transparent about it.” But he and other analysts said the data still made for some poor reading for the Riksbank.

Bloomberg economist Johanna Jeansson said the Swedish labor market is clearly deteriorating faster than the Riksbank had expected.

“Although the statistics office warned it may have overstated the last drop in employment and overstated the previous increase, there are other signs the labor market is slowing,” Jeansson said. “Jobless claims have increased and company surveys point to more cautious hiring plans. This should make the Swedish central bank scrap its plans to raise rates any time soon.”

Martin Enlund at Nordea echoed those views.

“Whatever they say about estimates or overestimates, what we are seeing is a cyclical weakening of the labor market,” he said. “A rate hike should really be 100% off the table.”

The krona pared losses and was down 0.13% against the euro during mid-morning trading.

To contact the reporter on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net

To contact the editors responsible for this story: Niklas Magnusson at nmagnusson1@bloomberg.net, Nick Rigillo

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