(Bloomberg) -- Sweden's government won't intervene in Ericsson AB's plan to cut thousands of jobs, confident the expanding economy can withstand the loss of key manufacturing sites.
While Ericsson's plan to eliminate 3,000 jobs in Sweden is “heartbreaking,” it comes at a time when the economy is “strong,” Enterprise Minister Mikael Damberg said on Tuesday.
“It's a very different situation now than during the financial crisis or the IT crisis,” he said after a press conference in Stockholm. “This cost cutting program in Ericsson comes in a very different environment.”
The jobs cuts may in fact be welcome news to Sweden's tech industry, which is struggling to recruit enough talent. While the country has become famous for its generosity toward Syrian refugees, it turns out that the second-largest group to get residence permits so far this year are Indian nationals, who mainly come to work in the tech industry.
The economy has enjoyed a boom amid record low interest rates and extra spending to cover the refugee inflow. The government last month predicted the economy will expand 3.5 percent this year, after 4.2 percent growth last year. The boom will continue this year and the next, and there are shortages of labor in many sectors, Sweden's National Institute for Economic Research wrote in a report on Wednesday.
Recruitment plans are more positive than normal, in manufacturing as well as retail and services. Both the government and NIER estimate unemployment to fall to 6.3 percent next year from about 6.8 percent in 2016. NIER's analysis also suggests that Swedish firms' international competitiveness is “relatively good.”
Ericsson, long a flagship of Swedish industry, is curbing production to cope with shifting technology and stagnant demand for wireless-network equipment. It will reduce manufacturing in the towns of Boraas and Kumla as it turns its focus to software development. Ericsson, which has 16,000 workers in Sweden, is also cutting jobs in sales, administration, research and development.
The government on Tuesday appointed two coordinators to help staff affected by Ericsson's closures. Damberg said that Sweden needs to become better at meeting recruitment needs in the new digital economy and educate more software engineers.
“We need to consider what we can do with the education system in order to meet the needs for competences that will grow going forward,” he said. “That's also something I think that the coordinators will look at.”
To contact the reporter on this story: Amanda Billner in Stockholm at abillner@bloomberg.net. To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net.
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