wage increases was no longer acceptable. today ’ s confidence in the riksbank ’ s current inflation target facilitates wage negotiations. the 1997 wage round, for instance, took the 2 % inflation target as a starting point. the development of wages is always a central factor in inflation assessments, but the difficulties involved in forecasting wages are considerable. the indicators used by the riksbank include data on wages and unit labour costs, shortage figures ( bottlenecks ) at industry level, wage drift and unemployment relative to unfilled job vacancies. another factor of importance for monetary policy is the equilibrium level of unemployment, that is, the level of unemployment that is compatible with stable inflation. attempts to push unemployment down below the equilibrium level with the aid of monetary stimuli are liable to just boost inflation. maintaining an expansionary monetary stance cannot therefore generate permanently higher employment. during the past year the situation in the swedish labour market has improved appreciably. since the beginning of 1999 the number in employment has risen by almost 100, 000. a continued improvement can be expected, but more employers are reporting difficulties in recruiting qualified labour even though unemployment in sweden is still historically high. there is still a need for measures of a structural nature to improve the workings of the labour market and thereby the long - term conditions for economic growth. consumption the demand side of the swedish economy, above all private sector demand, has picked up properly in recent years. in 1997 private consumption rose 1. 6 % from the previous year, followed by 2. 4 % in 1998 and a preliminary rate of 3. 4 % between the first halves of 1998 and 1999. major factors behind the growth of private consumption are the better labour market situation, rising disposable income and increments to household wealth. the consumption trend is particularly dependent on future household income. expectations of an improvement will lead to increased spending on consumption at the expense of current saving. at present, households ’ optimism about their own economy seems to have stabilised at a level that is historically high. the riksbank envisages that household expenditure on consumption will be stimulated in the future by, for example, rising real wages, low interest costs and tax relief. moreover, international economic prospects have stabilised and employment in sweden has risen. these developments suggest that the consumption trend will remain favourable. public sector the financial position of the public sector has been strengthened appreciably in recent years, partly as a result of decreased unemployment, but also because

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