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Thursday, October 24, 2013

Spanish unemployment: A temporary turnaround?

New data on Spanish unemployment are out today. The headline figures look, once again, rather encouraging. The overall unemployment rate has fallen below 26% in the third quarter of the year, and there are 39,500 employed people more than in the previous quarter.

The number of unemployed people has gone down by 72,800 - which is the largest decrease in a third quarter since 2005.


However, a few points are worth making:
  • The rise in the number of employed people is due to an increase in self-employed and temporary workers. The number of employees on permanent contracts has actually fallen by 146,300. One can see the glass half-full or half-empty here. This finding can mean that the Spanish labour market is becoming more flexible, or just that the increase in the number of employed people is driven by seasonal workers - especially in the tourism sector.
  • Employment is growing in the services sector, but is decreasing in agriculture, industry and construction. Another sign that the improvement in Q3 figures could be tourism-driven. This is not, in itself, a bad thing - given tourism is definitely one of Spain's key resources and it is obvious that the Spanish economy needs to rebalance (away from construction). But it can't quite be seen as a permanent source of growth, since the flow of tourists is per definition dependent on which season of the year you're in.
  • As we noted on this blog when the figures for Q2 came out, the number of active Spaniards (those working or actively searching for work) continues to go down - marking a further 33,300 decrease.
  • Seasonally adjusted data show that the unemployment rate has actually increased by 0.21% from the previous quarter, and that the level of employment has not stopped going down since Q2 2008. 

2 comments:

Anonymous said...

On a SA basis, job creation drops by -0.42% qoq in Q3, slightly worse than in Q213 (-0.3% qoq). There is no incremental improvement in job creation.

Regards

Rik said...

The Spanish labourmarket is becoming more flexible by economic forces not by structural measures.

People are pushed towards self employment just to have some income.
Also very doubtful if it are really 'normal' sort of jobs, As GDP still seems to be dropping and total wages (not sure how self employed fit in that calculation btw) as well, it doesnot do much of a recovery job.
It looks mainly that the supply side (of the labourmarket) is adjusting, but you need demand as well. And it is doubtful if there is demand (seen GDP figures).

Basically what this shows is that if governments are uncapable to go for relatively quick structural measures economics will simply force them in the somewhat longer term. Delaying the whole restructuring process and in that delay make debtlevels worse and effectively as we see in Spain deepens the crisis.

A rise in especially the service sector (next to the seasonal holiday stuff) indicates that it is very likely mainly the supply side of the labourmarket that is adjusting. Will undoubtedly be low level jobs which require no or relatively low investment by the demand side. Also seen the rotation from fulltime/permanent to selfemployed/parttime/temporary.

And seen the fact that Spain like the rest of Europe is a welfarestate or better an entitlementstate or even better than that an entitlementstate under heavy pressure. It can as well be caused by simply the pressure from the entitlementstate. Cutting social security simply means that people have to do something to pay their bills.
Seen the fact that the jobs are no or low new investment for the employer this might well be the complete picture. Or better the explanation of the largest part of what we see happening (next to the holiday effect of course, one doesnot exclude the other).

You need to see this being structural and likely combined with total wages on the rise to make it a proper indication of a recovery.
Or you should see normal jobs recover (no artificial drop in workforce at the same time as we see now in the US).