Unemployment rises to almost five million

Spain may have emerged from its worst recession in living memory but the darkest and most painfully human aspect of the crisis took a turn for the worse at the start of the year as the ranks of the unemployed soared to yet new record levels of just under five million.

According to the latest Survey of the Active Population (EPA) released Friday by the National Statistics Institute (INE), the number of people out of work jumped by 213,500 in the first quarter of the year to 4.91 million. The jobless rate rose by almost a full percentage point to 21.3 percent, more than double the average in the European Union and triple that of Germany.

Using a different methodology, the European Union said Friday Spain's jobless rate stood at 20.7 percent in March, compared with an average in the bloc of 9.5 percent, and 6.3 percent in Germany.

In five provinces - Huelva, Málaga, Cádiz and Almería in the southern region of Andalusia, and Las Palmas in the Canary Islands - unemployment was over 30 percent. In Andalusia, the Canary Islands, Valencia and Extremadura and the North African enclaves of Ceuta and Melilla, over half of the working population of young people were idle. The number of households in which all members were unemployed climbed by 58,000 in the quarter to 1.38 million.

The economy shed over a quarter of a million jobs in the first three months, with 18.1 million people managing to stay in work. A further 43,000 people also withdrew from the labor market. Since the start of the crisis in 2007, the economy has lost 2.35 million jobs.

The government said the job market had bottomed out. "We're at the worst moment," Deputy Prime Minister Alfredo Pérez Rubalcaba said.

"I'm not at all sure this is the peak," one analyst says

The administration insists the number of jobless will not reach the five-million mark, but Labor Minister Valeriano Gómez on Friday dismissed the relevance of that figure. "What is important is to create jobs, and to start doing so as soon as possible," he said.

The EPA coincided with a jump in inflation to just below 4 percent on higher food prices, while households were looking at steeper mortgage payments as the one-year euribor rate - the benchmark for setting the rates on home loans in Spain - ended the month at its highest level since February 2009 at just over 2 percent.

Weak consumer confidence was also evidenced by a sharp fall in retail sales in February.

The Cabinet on Friday passed a decree aimed at flushing out black-market jobs in order to increase tax revenues and reduce official unemployment, but there was more than a dose of skepticism about how effective the measures would be.

How long this bleak scenario is likely to remain in place is a question of who you are willing to believe. The government expects activity to be moving at a sufficient clip to start creating jobs again at the end of this year, and predicts average unemployment will come in at 19.8 percent.

But in a report at the end of last month, the Bank of Spain predicted the unemployment rate would continue to rise this year and would only begin to fall slightly in 2012.

The difference lies in diverging scenarios for the pace of recovery. Earlier this month, the government revised its economic forecasts for this year, halving its estimate for growth in consumer spending to 0.9 percent, but maintaining its prediction that GDP will increase 1.3 percent, with the export sector taking up the slack.

The central bank's scenario, however, limits growth in output for this year to 0.8 percent, a figure that coincides with the International Monetary Fund and that of other experts.

"In the current scenario, with rising interest rates, I'm not at all sure this is the peak," Bloomberg quoted José Luis Martínez, a strategist for Spain at Citigroup in Madrid, as saying Friday. "The decline in employment, rising interest rates, and rising prices leave little margin for consumption to be reactivated."