With almost five million out of work, Spain’s unemployment crisis rages on

In January 2009, Spain’s then Labour Minister Celestino Corbacho declared confidently that the number of jobless people in Spain would not surpass the four million mark. It took only three months for him to eat his own words as unemployment shot past that psychologically significant level. It has continued to tick upwards ever since. Corbacho lost his job in October last year.

Now another minister, Elena Salgado, who holds the economy portfolio and serves as second deputy prime minister, is also putting her credibility on the line. In a press conference on Thursday, she said five-million plus job seekers is not on the cards.

“In the opinion of the Economy Ministry that figure will not be reached, but that does not hide the fact that unemployment is a serious problem,” Salgado told reporters.

The minister was speaking a day before the National Statistics Institute published its quarterly unemployment statistics, which showed that the number of unemployed people rose by 242,500 in the first quarter of this year, putting the total number of people out of work at just over 4.9 million, a staggering 21.29 percent of the working-age population. Salgado has therefore been proven right. But for how long?

The first quarter is traditionally a bad one for jobseekers in Spain due to the seasonal effects of layoffs in the services sector after the Christmas period and the fact that hiring for the peak summer tourism season has yet to kick in, particularly when Easter falls in April, like this year. The second quarter should show better figures, but in the long term, Spain’s employment problems look set to continue.

Though Spain officially emerged from recession a year ago after seven consecutive quarters in which GDP shrank, the recovery has so far been anaemic, particularly with regard to jobs. The government expects the number of jobs created in Spain to increase just 0.2% this year, far less than the number needed to stave off further increases in joblessness. The situation looks only slightly better for the coming years with forecasts for job growth of 1.4% in 2012, 1.5 percent in 2013 and 1.7% in 2014.

Structural problems, too

At more than 21 percent, Spain’s unemployment rate is far higher than that of any other EU member state, and more than double the average of 9.5 percent across the 27-nation bloc. The cause for the sharp increase in recent years from a low of 8 percent in spring 2007 reflects the double whammy Spain suffered from the global financial crisis and the sudden end of a decade-long housing and construction boom that saw the sector lay off millions of workers. However, there are also structural factors at work, most significantly rigid labour market laws that have dampered hiring and reduced worker mobility, and which the Socialist government has only recently started to address.

The problems are similar to those faced in other so-called periphery states of the European Union, such as Greece and Portugal, all of them also suffering, like Spain (only more so, in most cases), from high public debts and deficits.

In contrast, the EU’s core economic powers, especially Germany, have experienced a boom in job growth in recent months.

On the back of strong manufacturing output and helped by economic and labour market reforms carried out a decade ago, German unemployment has fallen to 7.1 percent, its lowest level since the country’s reunification in 1990. With a population of more than 80 million – almost twice that of Spain – Germany has less than three million people out of work.