Logo Background RSS

Advertisement

Depression in Spain: Unemployment Hits 23.6%!

  • Written by Syndicated Publisher No Comments Comments
    May 7, 2012

    via email from Barclay’s Capital, Spain: Q1 unemployment rate rises; trend likely to continue into H1 2013.

     This morning Spain released labour market statistics for Q1. Seasonally adjusted, the unemployment rate rose to 23.6% from 23.1% in Q4 last year (Figure 1). We think that the labour market’s deterioration is likely to continue over the next 3-4 quarters. We look for unemployment to peak at nearly 26% in H1 2013, before slowly starting to decline.

    Beyond cyclical lags, the Spanish labour market trend, to a large extent, is a reflection of the hangover from a boom-bust in the construction sector, which for many years has been an important source of employment growth (Figure 2). It seems that the adjustment in the construction sector’s employment is close to an end: it now contributes c.10% to total employment, in line with the long-term average pre the housing sector boom.

    However, we think that the unemployment rate is likely to stay elevated for a while and that it will decline only slowly as the economy likely starts to grow in H2 2013. There are at least two reasons for our view: 1) fiscal consolidation will negatively affect consumers’ spending, economic activity and consequently employment; 2) As we pointed out in Spain: Assessing the fiscal and labour market reforms, we think that Spain needs better “active labour market policies” that can address long-term unemployment (Figure 3) and the retraining of young (in some cases) low-skilled unemployed workers (Figure 4).

    click on chart for sharper image

    Depression in Spain

    It is difficult to know precisely when Spanish unemployment stops going up. I see no reason it cannot hit 28% or even 30%.

    Spanish politicians (for now) remain insanely committed to the Euro. How long the citizens remain committed to the Eurozone is another matter.

    When is the Breaking Point?

    Will the general population of Spain put up with an unemployment rate of 28%? 30%? I think not, but I do not know the precise breaking point. Whatever it is, Spain has little chance for growth prospects for a decade as long as it remains in the eurozone.

    Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected.

    Spain will be better off as soon as that happens.

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com
    Click Here To Scroll Thru My Recent Post List

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.
    Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInPin on PinterestShare on StumbleUponShare on RedditShare on TumblrDigg thisBuffer this pageFlattr the authorEmail this to someonePrint this page

Advertisement

Closed Comments are currently closed.