Spanish unemployment increases to 23.7 per cent

Spanish unemployment unexpectedly rose in the fourth quarter, indicating the economic recovery isn’t strong enough yet for jobs growth to keep pace with the expansion of the labor force.

The jobless rate increased to 23.7 per cent from 23.67 in the previous quarter, the National Statistics Institute said in Madrid today.

“The increase in unemployment is due to a rise in labor force participation,” said Victor Echevarria from Analistas Financieros Internacionales in Madrid, adding that the return of “discouraged” workers to the labor force “can be considered a positive development.”

The workforce increased by 95,200 people in the fourth quarter, INE said, rising to 59.8 per cent of the adult population. In addition, the number of people with a job climbed by 65,100 to 17.6 million.

Spain's economy has grown for five straight quarters, and prime minister Mariano Rajoy, whose four-year term is ending this year, forecasts growth of 2 percent this year, exceeding the euro-area average.

In an interview with Efe published January 18, Mr Rajoy also said Spain will create about one million jobs between 2014 and 2015. “If Spain can continue to grow at 2 per cent, we could see 700,000 new jobs by the end of 2015,” said Javier Diaz-Gimenez, professor of economics at IESE business school in Madrid.

The government's 2015 growth estimate was matched by the International Monetary Fund in a report this week, when it raised its Spanish forecast while cutting the outlook for the euro area.

The IMF also said the European Central Bank, which may start quantitative easing on Thursday, should engage in an "all-in" bond-buying program to fend off the threat of deflation.

In Spain, consumer prices fell an annual 1.1 per cent in December, the most in more than five years.

The government has said its reforms have made Spain more competitive and attractive for foreign investors. Still, unemployment remains the second-highest in the euro area after Greece after a recession that drove unemployment to a record high with six million people out of work.

Bloomberg