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26/09/2016

Spain’s jobless rate falls to 4-year low ahead of vote

Social Europe & Jobs

Spain’s jobless rate falls to 4-year low ahead of vote

Acting Spanish Prime Minister Mariano Rajoy.

[Partido Popular/Flickr]

Spain’s jobless rate has dropped to a four-year low, official data showed on Thursday (22 October), giving Prime Minister Mariano Rajoy’s center-right government a boost, as it prepares for December’s general election.

In the busy July to September tourism period, when many Spanish companies take on new staff, the unemployment rate slid to 21.2% from 22.4% in the second quarter, the National Statistics Institute said.

Rajoy will hope the fall in unemployment “will play well at the impending general elections, encouraging voters to give his government more credit for guiding Spain from a near Greek-like meltdown in the latter half of 2012,” said Raj Badiani, an economist at IHS Global Insight.

The Spanish jobless rate is still the highest in the eurozone after Greece’s.

But it has fallen significantly from a peak of 26.9% in early 2013 and is also down from the 22.6% rate Rajoy inherited when he took office at the end of 2011.

The number of people looking for work in Spain fell by 298,200 in the third quarter from the previous three months to 4.85 million, the lowest level since the second quarter of 2011, the statistics office said.

“The numbers are very good, but what is most important now is that we maintain this cruising speed,” Rajoy said as he arrived at a gathering of European Union conservative parties in Madrid.

Spain emerged in 2013 from five years of on-off recession and the government forecasts the economy will grow by 3.3% this year ? more than twice the average forecast for eurozone countries.

The government says the recovery has been helped by 2012 reforms making it cheaper for firms to lay off workers and limiting the power of unions to negotiate collective-bargaining agreements across entire industries or regions.

The ruling Popular Party secured an absolute majority four years ago but polls show it is running neck and neck with the main opposition Socialist party with new centre-right party Ciudadanos poised to play the role of kingmaker after the 20 December election.

‘Protected insiders’

The government predicts the jobless rate will fall to 21.1% at the end of 2015, down from 23.7% a year ago.

But opposition parties are less optimistic and they like to point out that the majority of new jobs that have been created are temporary.

The number of short term contracts signed in the third quarter outnumbered the number of permanent contracts by a ratio of two to one.

“This has a long term impact on the type of activity that is developed in a country because temporary jobs receive much less training,” said Jesus Castillo, southern Europe economist at Natixis, in Paris.

Ciudadanos wants to eliminate all temporary contracts and proposes a “single contract” system.

There is “a very protected core of insiders” and an “extremely unprotected” outer layer of largely young and female workers in Spain, economist Luis Garciano who has helped develop the party’s economic platform, told AFP.

The jobless rate among the under-25s was still extremely high at 46.6%, and there were 1.57 million families with all working-age members unemployed.

New anti-austerity party Podemos on Tuesday (20 October) proposed giving households with no source of income a monthly subsidy on €600.

The workforce, or the number of people either employed or actively seeking work, fell by 116,000 in the third quarter, which contributed to the lower unemployment rate.

“This can only be explained by people withdrawing from the labour market,” said Angel Valls of Catalan business school Esade.

Spain needs more “very specific” training courses to help the unemployed move away from sectors where job prospects have dried up, such as the construction industry, said Alfonso Novales, economics professor at Madrid’s Cumplutense University.

Background

The Spanish budget deficit has become a contentious matter ahead of the country's general election in December.

On 13 October, the European Commission called on Spain to present an updated draft budget “as soon as possible”. Commission forecasts see Spain's deficit reaching 4.5% of GDP in 2015 instead of the required 4.2%, while in 2016, the deficit will decrease to 3.5% of GDP, much higher than the target of 2.8%.

>>Read: Commission calls on Rajoy to meet deficit targets before elections

Falling unemployment figures will come as a boost for the Conservative Prime Minister Mariano Rajoy, who is seeking reelection. But his Partido Popular (PP) and its main rival, the Spanish Socialist Workers' Party (PSOE), face rising competition from smaller emerging parties like Ciudadnos (the 'Citizens' party) and the anti-austerity Podemos.

A poll published on 5 October by TNS Demoscopia showed the PP on 27% ? down 0.2% in one week ? and the PSOE at a disappointing 21.9% (down 1.1%). Meanwhile, Ciudadanos has gained 2.5% in one week to reach 16.5%, leapfrogging Podemos (now at 14.8%).

>>Read: Mariano Rajoy’s woes mount ahead of Spanish elections

Timeline

  • 20 December: General election.