(Bloomberg) -- Sweden’s unemployment rate unexpectedly rose last month, putting at risk a housing market recovery after one of the worst property slumps globally.

The seasonally adjusted jobless rate increased to a four-month high of 7.6%, exceeding all estimates in a Bloomberg survey of analysts. The median projection of 7.3% in the survey indicated no change from January was expected.

The data shows the labor market — which typically reacts to changes in the economy with a lag — is now being dented by the fallout from higher inflation and rising credit costs in the largest Nordic economy. How unemployment develops will be decisive for the depth of Sweden’s worst housing rout in decades, analysts at SEB AB said earlier this week, ranking it higher than monetary tightening by the Riksbank.

Read More: Sweden Housing Market Sentiment Stays Negative in SEB Survey 

“The labor market has stayed resilient for a long time but now we see early signs of a dampening,” Swedbank AB analyst Emma Paulsson said in a note to clients. Still, she said “the outcome of the collective wage negotiations and how long the new agreements will be is more important to the Riksbank in the near term” than unemployment.

The Riksbank expects Swedish unemployment to rise to 8% this year, with a further increase to 8.4% projected for next year. The housing decline, sparked by a series of rapid interest-rate increases by the central bank, will contribute to the economy’s descent into a full-year contraction as the only one in the European Union, according to the most recent forecast from the trade bloc.

--With assistance from Joel Rinneby and Harumi Ichikura.

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