Higher growth leads to lower unemployment, but impact depends on labour market structure
News, Staff memo When GDP rises, unemployment falls, with the strongest effect after about a year. A new analysis of all regions in Sweden for the years 2000-2023 shows that the classic so-called Okun’s law also applies at regional level. However, the analysis also shows that the impact differs significantly between regions and groups.
Regions with high employment and greater mobility react faster and more strongly, while regions with high unemployment, a high proportion of people born abroad or high population density show weaker reactions.
The pattern is also visible between groups. Unemployment among those with upper secondary school education and those born in Sweden falls sharply when GDP rises. For the less educated and those born outside Europe, the effect is much weaker.
Higher growth leads to lower unemployment in all groups, but the impact of growth depends on the structure of the labour market and how well matching works.
Read more in the Staff Memo: “The relationship between growth and unemployment at the regional level – what do Swedish data tell us about economic activity and structure?”
Authors: Stefan Laséen and Ruth-Aida Nahum, who work at Sveriges Riksbank and the Ministry of Finance, respectively
Staff Memos
A Staff Memo provides Riksbank staff members with the opportunity to publish ad-vanced analyses of relevant issues. It is a staff publication, free of policy conclusions and individual standpoints on current policy issues. Publication is approved by the head of department concerned. The opinions expressed in Staff Memos are those of the authors and should not be regarded as the Riksbank’s standpoint.