Abstract Many OECD countries are currently experiencing economic crisis and introducing counter-measures with unknown effects. To learn from previous experience, we explored whether there were delayed or differential effects of the Swedish recession in the 1990s and the government's response to it for people with limiting longstanding illness or disability (LLSI) from different socioeconomic groups (SEGs), by policy analysis and secondary data analysis of the Swedish Survey of Living Conditions (ULF) from 1978 to 2005. The government policy response involved cutting public expenditure, privatising some services and measures to boost private sector employment. There was a decline in overall employment rates from the early 1990s, particularly among men and women with LLSI and in lower SEGs. Public sector employment declined from 53 to 40 percent among women and from 23 to 14 percent among men. Private sector employment increased modestly for women (from 31 percent to 37 percent), and stayed stable at 59–60 percent among men. Following economic recovery, employment rates continued to decline among men and women with LLSI from manual SEGs, while the employment levels increased among most healthy men and women. There was a concomitant increase in rates of LLSI, sickness absence and rates of disability pension particularly among women in lower SEGs. Conclusion The policy response to the 1990s economic crisis in Sweden had differential consequences, hitting the employment of women in the public sector, especially women with both LLSI and low socioeconomic status. The observed increase in disability pension rates, particularly among women with LLSI in lower SEGs, may be a delayed effect of the policy response to the economic crisis.