Spanish Unemployment Trend Reversing
June 4th, 2009
May jobless claims fall 24,741, first decline in 14 mths, Joblessness down in all sectors, govt sees end of crisis, Govt says 8 bln euro public works plan slows jobs decline, Govt does not rule out extra stimulus spending
Spanish unemployment claims fell in May for the first time in 14 months, prompting the government to forecast the end of Spain’s crisis despite scepticism from unemployed workers and private economists.
Following months of swelling lines outside unemployment offices, the number of dole seekers fell 24,271 in May after an 8 billion euro ($11.39 billion) employment scheme created 140,000 temporary Spanish property construction jobs across Spain, the Labour Ministry said on Tuesday.
Jobless claims fell across sectors ranging from industry to agriculture as firms cranked up for the key summer tourist season and interest rate cuts boosted consumer confidence maulled by the global crisis and a housing boom collapse.
“I think it is no exaggeration to say that we could be at the beginning of the end of the crisis,” Industry Minister Miguel Sebastian told reporters after the jobless data.
The reversal in Spain’s soaring joblessness could not come soon enough for Prime Minister Jose Luis Rodriguez Zapatero as polls showed the ruling Socialist Party trailing the opposition conservative Popular Party ahead of June 7 European elections.
Dole claimants eased to 3.62 million, still the highest absolute level of any euro zone economy after a year in which Spain delivered about half of all layoffs in the EU.
The few unemployed waiting outside a dole office in central Madrid said the government’s Plan E (Spanish Employment and Economic Stimulus) scheme to create 400,000 short-term public works jobs would do little unless accompanied by wider recovery.
“There is no credit to finance projects,” said unemployed topographer Sixto Limon, laid off after nine years with construction firm Ferrovial. “Everyone knows Plan E jobs are rubbish, its 3, 4 months work then back on the dole.”
Labour Minister Celestino Corbacho said the tide could be turning on unemployment, but did not rule out more stimulus spending on top of existing projects. See separate story on Plan E [ID:nLQ61316].
“We’ll see if there is room or not to have another new measure, and whether it’s necessary,” Corbacho told reporters after the release of Tuesday’s figures, describing the results of Plan E as “magnificent”.
Spanish unemployment rose to 18.1 percent in April, according to separate data on Tuesday from the European Commission, which expects the rate to top 20 percent next year. Spain is forecast to be the last member of the European Union to exit recession, likely in 2011.
Spain announces monthly jobless claimant figures in addition to an unemployment rate calculated each quarter using a different methodology.
Public deficit and debt levels are rising faster in Spain than any euro zone country other than Ireland after Zapatero launched one of the bloc’s largest stimulus packages equal to nearly 5 percent of gross domestic product.
The Spanish government sees anti-crisis spending adding 150 billion euros to public debt by the end of next year and some analysts fear Spain could be heading towards the same kind of spending cuts and tax hikes Ireland has been forced to take.
Analyst Jose Carlos Diez said it was too early to see a turning point in Spanish unemployment but saw firms hiring as production picked up in the next months after record falls.
“We’ve seen the worst of job destruction and little by little Spain is coming out of the tunnel,” said Diez, chief economist at the Intermoney consultancy in Madrid.
Others feared a new round of layoffs when public works projects, and room for stimulus spending run out.
“From September we could start to see job losses again,” said Nicolas Lopez, research director at the M&G consultancy.
Unemployed vehicle parts maker Jesus Prieto said his job depended on Spain’s economy recovering more quickly than the European Commission expects.
He was laid off temporarily this month by U.S. firm Eaton Corp but said he could be fired in 2010.
“They will review the situation next year. My job depends on recovery,” said Prieto, 36, who has a mortgage to pay and a young family to support.
Story from Reuters
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