Spain announced Friday its jobless rate broke the 25-percent barrier for the first time as austerity cuts squeezed the recession-struck economy. Tens of thousands of jobs were destroyed in the third quarter as Prime Minister Mariano Rajoy's government raised taxes, cut spending and pondered whether to snatch a eurozone rescue line.
The unemployment rate rose to 25.02 percent in the third quarter from 24.63 percent in the previous three months, a National Statistic Institute report showed. Among workers aged 16-24 the jobless rate towered at 52.34 percent in the third quarter, only slightly down from 53.27 percent in the previous quarter, the institute said.
"They are very negative figures," said Soledad Pellon Bannatyne, market strategist at brokerage IG Markets. "We are talking about the highest unemployment rate in the history of Spain. It's beating new records and that is perhaps the worst part of what this crisis is leaving us." Pellon predicted no improvement for next year, either.
She said the economy needed to grow by more than 1.5 percent in order to generate new jobs but even the government's optimistic forecast was for a economic contraction of 0.5 percent in 2013. "With that 0.5-percent fall there won't be a single job created. More than that, with that 0.5-percent fall we will carry on destroying jobs," the economist said. After more than a year of recession, the soaring jobless figures and biting cuts have prompted growing street protests and unions have called a general strike for November 14.
A total of 5.78 million people searched in vain for work in the July-September quarter, up 85,000 from the previous three months, the official data showed. The number of Spanish households in which every member is out of work climbed to 1.74 million - or one in ten of Spanish homes. The jobless rate was "eye-catching" but the biggest concern was the cumulative fall in employment over the past 17 quarters, said Raj Badiani, London-based economist at analytical group IHS.
Job losses since the third quarter of 2007 now stand at 3.19 million, equivalent to a 15.6 percent drop, he said. Spain's jobs drama is being fed by a recession that is now moving into a second year, according to the Bank of Spain. The economy has been shrinking since mid-2011 and is expected to decline again in the third quarter of 2012 at a rate of 0.4 percent, the same as in the previous three months, the central bank said this week.
But "to the person on the street, the destruction of several million jobs since late-2007 coupled with an unemployment rate at 25.0 percent are a more relevant guide to the depth of recession, and even suggest that Spain is being engulfed by near-depressionary conditions," Badiani said. Employment will sink further in 2013 as austerity cuts chip away at public sector jobs and as private firms are hit by slumping demand, he said. At the same time, the property market had yet to hit bottom.
Spain, the fourth-largest economy in the 17-nation single currency area, has launched a vast austerity programme to save 150 billion euros ($194 billion) between 2012 and 2014. After missing last year's deficit-cutting target by a large margin, Spain promised to lower the overall deficit to 6.3 percent of economic output this year and to 4.5 percent of output next year. If the economy fares worse than Madrid anticipates, the government may have to take even tougher austerity measures if it wants to hit those targets.
"Even if we have economic growth maybe in a year or two, we can't expect that economic growth to generate much employment," warned Rafael Pampillon, economist at Madrid's San Pablo CEU University.
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