According to the report the labour market situation will improve steadily during 2010 and 2011, but as more people enter the labour market unemployment will remain high.
Employment levels will however increase and in 2011, 78 000 more people are forecast to be in work than in 2009.
"The new direction is clear. Companies expect strong demand, both firms and households are optimistic," said Tord Strannefors at the Employment Service.
But the upbeat projection could be threatened by global and regional economic factors, Strannefors warns.
"Obstacles can come from the world around us, the indebted European economies. This forecast is based on the Greek crisis being controlled," he said.
He also stressed that employment is now growing strongly as the economy recovers.
"But that does not mean that unemployment is falling rapidly, because we also have a very significant influx of people seeking to enter the labour market.
The Employment Service also expects the benefits of the economic upswing to be felt across the entire country.
Stockholm will probably experience the strongest development, but Västra Götaland should also benefit after having been hit hard by the crisis.
Employment Service director-general Angeles Bermudez Svankvist has identified a number of challenges for the public body in upcoming years. One of them is the very high youth unemployment.
"What worries me is that schools have equipped young people with poor qualifications. This is a serious situation," she said.
The forecast does not specify a numerical assessment of youth unemployment.
Tord Strannefors expects that both youth unemployment, as well as overall unemployment, to decrease in 2011. It is likely that the cut in youth unemployment will be slightly stronger than the decrease in overall unemployment, he said.