Spanish unemployment rate falls to lowest level since 2008

The number of people looking for a job in Spain fell below three million for the first time since the global financial crisis 14 years ago, as the unemployment rate dropped to 12.5 per cent in the second quarter.

An even more welcome surprise was that the number of permanent jobs is up 617,000 year-on-year, while temporary jobs fell by 241,000.

“When you create more permanent jobs, you incentivise companies and workers to increase productivity,” said Ignacio de la Torre, chief economist at Arcano. “People on temporary contracts have no spur to work more efficiently nor bosses to train them.”

The increase in permanent jobs follows labour reforms, approved in February, which were specifically aimed at cutting the high proportion of the Spanish labour force on temporary contracts.

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The percentage of people in short-term jobs has fallen from about 25 per cent at the beginning of 2022 – the highest in the Euro area – to about 22 per cent. The number of people in permanent jobs is estimated to have increased by close to a million over the past 12 months.

Spain’s National Statistics Institute on Thursday said the number of unemployed workers fell to 2.9 million in the second quarter, down from 3.2 million in the first quarter – the first time since 2008 that the euro zone’s fourth-largest economy had recorded a jobless rate below three million.

‘Gaining traction’

The employment figures support projections of upbeat second-quarter gross domestic product figures due to be published on Friday. The Madrid government this week upheld its previous annual growth forecast of 4.2 per cent for this year and only slightly lowered its projection for 2023 to 2.7 per cent.

“Somewhat behind schedule, the Spanish economy is gaining traction due to the recovery of the services sector,” said José Ramón Iturriaga, fund manager at Abante Asesores. “These employment figures allow us to be optimistic about Spain’s relative economic performance in the future.”

The number of people with jobs increased by almost 800,000, or 4 per cent, over the past year to 20.5 million in the second quarter. Jobs in services accounted for the vast majority of the rise in employment, with the sector employing 693,000 more people than a year ago, compared with 111,500 more in industry.

“It’s natural that the strong job recovery has been focused in low-productivity sectors like tourism,” said Mr de la Torre. “But this pace cannot be maintained over the medium term, when job creation slows. It’s important for growth that more people are employed in higher-productivity sectors.” Copyright The Financial Times Limited 2022