The picture of employment is nevertheless rather divided. The number of jobs in the manufacturing industry has declined markedly, while jobs in the public sector and the service industries have increased. Given this, the situation on the labour market is of particular interest. It appears to be relatively constrained, considering that we are at the end of an economic downturn and wage increases have also been slightly higher than expected, particularly in the construction sector and the service industries. As the level of employment has been retained, despite the decline in demand, productivity has shown a weak development, particularly in the services sector. To some extent, the effect of companies' higher costs has not had an impact on prices, but instead led to falling profit shares. However, it now appears that the demand situation has enabled companies to shift a larger part of the cost increases onto consumers. So, how come wage increases have been higher than expected? One possible explanation may be that the resource utilisation in the economy has been higher in recent years than we had earlier believed. A strained resource utilisation means quite simply that the total demand is high in relation to the production capacity of the economy. This is usually revealed, for instance, in rising wage increases and higher underlying inflation. In the Inflation Report presented on 19 March 2002, we have made a slight upward revision for resource utilisation.
These include the low precipitation that affected hydroelectric power, various diseases that affected livestock and the fact that Sweden and southern Europe suffered poor harvests. We are in agreement with other forecasters and analysts that the inflation rate will fall as the effects of the transitory price rises abate and inflation approaches 2 per cent in early summer. In the longer term perspective, however, the picture looks slightly different and developments indicate an inflation rate above the target of 2 per cent. The assessment contained in the main scenario of the most recent Inflation Report has CPI inflation at 2.2 per cent one year ahead and 2.4 per cent two years ahead. The corresponding forecast for underlying inflation, UND1X, is an increase of 2.2 per cent at both one and two years ahead. It is the latter measure that is the most central to monetary policy. However, each inflation assessment also takes into account the risk spectrum. The risk spectrum mainly concerns domestic inflationary pressure. If resource utilisation comes under greater strain than the Riksbank has estimated in its main scenario, or if the potential growth rate has been overestimated, there is a risk that inflation will be higher than expected in future. Taking into account the risk spectrum, underlying inflation comes out at 2.3 per cent both one year and two years ahead. Although the inflation rate is expected to fall over the coming months, the forecasts indicate that it will exceed the inflation target one to two years ahead.