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Labour market remains strong - despite lowered growth forecasts

16 November 2022
Unemployment in the Gothenburg region continued to fall during the third quarter despite a weaker macro economy. But the global situation, inflation and an approaching recession have dampened Gothenburg companies' forecasts considerably, shows the fourth Economic Outlook report of 2022.

The overall economic tendency for businesses in the Gothenburg region was 91.5, indicating a weaker than normal situation. This was a substantial drop compared to the previous quarter's 109. The situation, however, varies considerably between sectors. 

The manufacturing sector in the region is still going strong, with the capacity utilized remaining high at 86 per cent. The companies believe in strong production volumes for some time ahead and continue to advertise vacancies, although profitability is expected to weaken somewhat. In the construction sector, which has been strong for a long period, the situation has slowed somewhat and is now described as normal. Going forward, however, companies believe in reduced construction volumes and the need for fewer personnel.

The situation for the commerce sector has weakened substantially. Sales and profits are down for many businesses and employment is expected to decrease, even though the Christmas trade is just around the corner. The services sector has also cooled off significantly. Services companies foresee unchanged demand and profitability going forward. In some segments, the need for personnel is still great. Overall services companies are cautiously optimistic.

Inflation and interest rates steering the development

Sweden is expecting negative GDP growth next year (-0.6 per cent), and the region's key export markets also see dampened growth expectations. Our export weighted GDP growth forecast for 2023 for the ten largest markets is 1.1 per cent, down from 2.5 per cent in 2022.

“A recession is approaching, but the situation varies greatly. The region's industrial companies hold up somewhat better than businesses in other sectors. The long delivery times have built up the companies' order books while the weak krona has benefited parts of industry,” says Henrik Einarsson, director of business establishment and investment services at Business Region Göteborg.

The labour market continues to strengthen

Unemployment fell in October to 5.6 per cent in the Gothenburg region (-0.8 percentage-points year-on-year). This is the lowest of Sweden’s metropolitan regions, and lower than the national unemployment rate of 6.6 per cent. Compared to the same period one year ago, unemployment has fallen within all groups of the labour market. Among foreign-born young people, unemployment is 14.8 per cent, which is 4 percentage-points lower than in October 2021. 

The number of advertised jobs remained at a historically high level during the third quarter, with an average of 10,900 permanent positions advertised per month. Among those looking for staff are the Swedish Exhibition and Congress Centre, the electric aircraft developer Heart Aerospace, the joint R&D centre of Northvolt and Volvo Cars and the food supplier Kavall.

Statistics Sweden's data shows that employment increased strongly in the Gothenburg region during the third quarter, with a total of 583,000 people employed. Compared to the same quarter last year, it rose 7.3 per cent, although the comparison may be exaggerated due to a change in measurement methodology.

“The most surprising thing is the strong labour market. Although the level of growth is a bit uncertain due to a change in the methodology, we can see that the labour market is stronger in the Gothenburg region than in the Malmö and Stockholm regions, when we compare with the same quarter last year,” says Peter Warda, senior analyst, Business Region Göteborg.

“We expect, however, that job growth will lose momentum going forward, and that it will become more difficult to enter the labour market due to a weaker economy.”

Guest nights record high, but house prices are falling

The hospitality sector performed strongly during the third quarter. With a monthly average of 679,000 guest nights, the hospitality sector in the Gothenburg region beat the previous record from 2019 by a wide margin. The occupancy rate of hotels averaged 77.5 per cent. Göteborg Landvetter Airport had 479,000 air passengers per month during the quarter.

Meanwhile, flat prices have fallen more sharply in Gothenburg than for Sweden as a whole, both compared to the previous quarter (-3.0 per cent) and year-on-year (-8.3 per cent). The decrease for house prices in the Gothenburg region (-8.4 per cent on an annual basis) is on par with Sweden as a whole (-8.1 per cent on an annual basis).

Slight drop in new car sales, but electric car sales increase 

During the third quarter of 2022, approximately 7,200 new cars were registered in the Gothenburg region (-0.8 per cent on an annual basis), of which just over 31 per cent were new electric cars. For electric cars alone, however, new car sales increased during the quarter (+11.2 per cent on an annual basis).

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Henrik Einarsson
Director of Business Establishment and Investment
Area of work: Establishment Business climate Regional development
Area of concern: Management team Establish and invest

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