SPANISH ECONOMY

Unemployment hits yet new record high at the end of 2012

Just under six million Spaniards out of work as labor leaders decry “unsustainable” situation

Madrid -

Unemployment in Spain reached record highs in the last quarter of 2012 as the recession deepened due to the government’s austerity drive to trim the public deficit.

According to the Active Population Survey (EPA) for the fourth quarter, released Thursday by the National Statistics Institute (INE), the number of people out of work fell just short of six million at 5.965 million as the jobless rate rose from 25.02 percent to 26.02 percent, both records for the current historical series, which dates back to 1976.

The number of unemployed in the quarter increased by 187,300 from the previous three months, and by 691,700 for the full year. The economy shed 363,300 jobs in the three months and 850,000 for the 12 months, the second-worst year in the crisis since the height of the previous recession in 2009, when 1.2 million jobs were lost. The size of Spain’s active population shrank to 16.957 million, the lowest level since 2003, representing about one-third of the population.

The Bank of Spain on Wednesday estimated that the pace of the downturn in activity accelerated to 0.6 percent on a quarterly basis from 0.4 percent in the previous three months as GDP shrank 1.3 percent for the year.

The risk of further job destruction remains high"

The government believes that the economy will be growing at a sufficient clip at the end of 2013 to start creating jobs again. However, the IMF on Wednesday said it expects activity to deteriorate further this year, with GDP forecast to shrink 1.5 percent. The administration’s estimate is for a contraction of 0.5 percent, a figure few experts share.

“The government expects unemployment to come down in 2013 but it seems too optimistic given not only the weak economic activity we expect, but also the usual lag between activity and unemployment,” Bloomberg quoted Ricardo Santos, a euro-area economist at BNP Paribas in London, as saying. “This will continue going forward given that the bulk of the cuts in the public sector have yet to be made.”

The government is expected to miss its deficit-reduction target for 2012 of 6.3 percent of GDP, and will be challenged to meet this year’s goal. “For 2013, the European commitments acquired under the Stability and Growth Pact lay down an overall general government deficit target of 4.5 percent of GDP, the attainment of which will require a further and very ambitious fiscal effort on the part of the central government and the regional governments,” the Bank of Spain said Wednesday in its latest economic bulletin.

Other experts agreed the situation is going to get worse before it gets better. “We believe that in the first part of the year, the jobless rate could approach 27 percent, and we believe the risk of further job destruction remains high,” Reuters quoted Cortal Consors, director of strategy and the economy, as saying.

1.833 million households have all their active members out of work

The number of people in work in the fourth quarter increased only in agriculture, with services, construction and industry all seeing a fall. The number of part-time workers rose to 15.33 percent of the total labor force, while the number of people in full-time employment plunged by 473,400 in the final quarter. Over the year, the number of freelance workers rose by 53,300.

The number of households with all of their active members out of work increased by 95,800 in the fourth quarter to 1.833 million.

A draconian labor reform introduced by the Popular Party (PP) government of Prime Mariano Rajoy making it easier and cheaper to sack workers, together with the government’s austerity policies, sparked two one-day general strikes and regular massive street protests.

“The situation is unsustainable. The figures show that the labor reform has only made the problem worse,” Cándido Méndez, the leader of the UGT labor union said in an interview with EL PAÍS.

“It’s a job-destruction machine. It is essential to make a shift in policy and focus objectives on a recovery in economic activity and employment without undermining the welfare state. The destruction of the productive and social fabric will take decades to repair itself,” Méndez said.

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