Increasingly debilitated labor market

In view of the further slump in employment in November, a month when 205,000 people took their names off the Social Security employment lists and the public employment services saw more than 74,000 persons register as unemployed, raising the registered unemployment figure to more than 4.9 million, we may ask why the government goes on denying the palpable worsening of the economy in the course of 2012, and the zero expectations for an improvement in 2013.

But what is more important is the perplexity that is spreading about a passive economic policy, locked into an ongoing succession of cutbacks that do not even achieve any considerable reduction in the deficit — ostensibly the only reason they are being applied.

Prime Minister Mariano Rajoy, his economic team, and a broad array of supporting voices stubbornly speak of vague and wishful hopes, such as the claim that the adjustment measures will eventually bear fruit, and that the labor market reform will create employment, without specifying when the improvement will begin to be felt, and what the total damage to the welfare state will have been before a recovery sets in.

The truth is the massive slump in the labor market reflects, precisely, the null expectations for growth in the economy, which investors perceive as the chief effect of the government’s fiscal consolidation policy. In the absence of any forecast of increasing demand — either from investment or consumption — there are no reasons for investing, nor of course, for creating employment.

There are a number of things the government has been incapable of achieving, in this order: first, of implementing effective fiscal consolidation policies — effective in the sense that the deficit has not been corrected in the measure agreed upon with Brussels in spite of the cutbacks decreed; nor has it been able to implement structural adjustment in coordination with employment stimulus policies in the sectors most resistant to recession; nor has it been able to convince companies of the need to speed up investments for the sake of a quicker recovery; and lastly, in an increasingly disturbing display of inhibition, it has so far been incapable of taking the step of requesting the European Central Bank’s intervention in the secondary debt market, thus condemning Spanish companies to bear borrowing costs that are sharply dissuasive of undertaking any investment at all.

Six million unemployed

The preceding set of causes necessarily leads to levels of unemployment that point toward a breakdown of social stability, and tend to undermine the future of the state pension system. The possibility cannot be ruled out that, when the National Statistics Institute’s Active Employment Survey (EPA) figures come in for the fourth quarter of this year, the number of unemployed people in Spain will be found to have risen to six million.

The public no longer believes in the ruling Popular Party’s tale that all of this is the result of the “inheritance received from the Socialists.”