Spain’s jobless rate at 21% as election looms

Spanish unemployment rose for the first time in a year as the country gears up for a new election after four months of talks to form a coalition collapsed.

The jobless rate increased to 21% in the first quarter, as the number of Spaniards without a job rose by 11,900 to 4.8m in what is typically a challenging quarter given the labour market’s seasonal dynamics, which sees firms shedding staff as tourist activity drops.

Despite yesterday’s data, the Spanish economy has added 574,800 new jobs over the past 12 months as the recovery gained momentum.

Separate data out of Germany yesterday showed its jobless rate was steady at 6.2%.

The latest health check on the Spanish economy comes as voters prepare for a second general election in six months after King Felipe called to a halt efforts to piece together a governing coalition on April 26.

The election will be officially called on May 3, and the ballot is expected to take place on June 26 with no candidate seen winning a majority.

While the political scenario remains unclear, the caretaker government led by Mariano Rajoy expects the economy to grow 2.7% in 2016 — down from a previous estimate of 3% — and 2.4% next year.

Spain grew 3.2% in 2015, the fastest expansion in eight years. The government sees unemployment falling to 19.9% this year and reaching 17.9% in 2017.

Banco Santander chief financial officer Jose Antonio Garcia Cantera said earlier this week the Spanish economy is “thriving” despite the political uncertainty with mortgage lending and retail sales accelerating.

Meanwhile, German joblessness extended its decline, underscoring the strength of the labour market as Europe’s largest economy seeks to absorb a wave of refugees, according to figures also released yesterday.

The number of people out of work fell by a seasonally adjusted 16,000 to just over 2.7m in April, marking the seventh consecutive drop. The jobless rate stayed at 6.2%, the lowest level since German reunification.

The reading signals German economic growth is strong enough to prompt companies to tap into a pool of potential workers that is rising after the country admitted more than one million migrants in 2015. 

The labour market has been a cornerstone of the country’s recovery, supporting domestic demand as exports waver in the face of a global slowdown.

“Despite the recent drop in exports to China and other emerging markets, Germany continues to create ever more jobs,” Holger Schmieding, chief economist at Berenberg Bank, said.

“Domestic demand looks set to remain a pillar of strength at the core of Europe, helping the eurozone to leave its current soft patch behind and return to trend growth of around 1.6% by mid-2016,” he said.

* Bloomberg


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