Defending Reinfeldt (as best I can)

Incompetence at the finance department has caused Sweden’s Prime Minister to erroneously claim that there are 100.000 more jobs now than in September 2006, when he took power.

But Reinfeldt is not wrong about his job creating record before the crisis. In September 2008 the employment rate was 0.5% higher than September 2006, which is remarkable, since 2006 was an unusually good year. Before the Great Recession hit us, Sweden under Reinfeldt had created 126.000 new jobs in two years.

Of course in late 2008 the crisis hit Sweden. Employment dropped. However, because of supply side reforms, the negative effects of the crisis was mitigated in Sweden compared to other countries.

The latest month for which I have data is December 2009. Employment is seasonal, so we should compare periods in years with each other, so we use December 2005 as the baseline.

Compared to the latest comparable month in which the Social Democrats were in power in December 2009 there were 101,000 more jobs in Sweden.

Comparing the last month we have data (December 2009) with the last month in which Social Democrats were in power (September 2006), there were still 12,000 more jobs. Now if we are going to be fair, we should note that the population also increased. There are more jobs, but also more people, and a -1.4% lower employment rate.

There is still a part of the story left however. The main reason the population has increased is immigration. In December 2009 there were 182.000 more working age immigrants than in December 2005.

In Sweden immigrants have low employment rate. Not only was the government forced to help create jobs for a growing population, and deal with the economic crisis, they were forced to create new jobs for 182.000 immigrants, for which the labor market had little demand. In addition, in this period there has been demographic change, with the Swedish population aging, which automatically reduces the employment rate of the 15-74 group (even as the age corrected employment rate stays unchanged).

If we look at the 20-64 group and limit our discussion to those born in Sweden, the employment rate was virtually constant despite the economic crisis! The employment rate for Swedes was 80.4% in December 2009 versus 80.7% in December 2005.

Taking in 200k immigrants is one important reason why jobs created by the Swedish economy has not been able to keep up with population growth. Of course, someone may remark that the Reinfeldt government has itself to blame for continuing with accelerating immigration levels in a time of economic crisis, but that is another story.

In the end it is quite remarkable that the Sweden has been able to maintain employment (corrected as I have for demographic change) the last 4 years against the tidal wave of the financial crisis . The positive long term effect of the reforms have been able to almost entirely neutralize the negative short term effects of the crisis.

I predict that by the summer of 2010 there will be more jobs than there were the summer of 2006.