Spain’s unemployment rate fell to the lowest since the end of 2011 in the third quarter as its economy turned into one of the fastest-growing in the euro region.
Joblessness fell to 23.7 percent in the three months through September from 24.5 percent in the previous quarter, Spain’s national statistics institute INE said in Madrid today. The economy grew 0.5 percent in the period, the Bank of Spain predicts.
Prime Minister Mariano Rajoy, whose four-year term ends next year, eased laws on firing and wage cuts in 2012 to encourage companies to hire. Still, unemployment remains the second-highest in the European Union after Greece even as the Spanish economy has completed its first full year of growth since 2008.
“It’ll take the economy about eight years to recover pre- crisis job levels,” said Diego Trivino, an analyst at Intermoney Valores in Madrid. “Unemployment will remain high and close to 18 percent for the next five years.”
Economists surveyed by Bloomberg News forecast a decline in joblessness to 24.1 percent in the third quarter.
The Bank of Spain estimated growth in the euro area’s fourth-largest economy slowed to 0.5 percent in the third quarter from 0.6 percent in the second, according to preliminary data published in its monthly bulletin today. INE’s first estimate is due on Oct. 30.
Downside risks have increased in recent months due to deteriorating growth prospects around the world, and in particular in the euro region, the central bank said. Still, it confirmed its growth forecasts of 1.3 percent for 2014 and 2 percent for 2015.
Rajoy’s government is relying on economic growth to reduce joblessness. It predicts the rate will drop to 22.9 percent next year, compared with a record 26.1 percent in 2013, when the economy shrank 1.2 percent.
“In the mid-term, unemployment will continue to decline,” said Giovanni Zanni, an economist at Credit Suisse Securities in London. “The pace is fairly quick given the growth levels. There are good reasons, employment increasing, as well as bad ones, people leaving the Spanish labor force, though the good ones probably exceed the bad ones.”
The number of jobs rose 1.59 percent from a year ago in the third quarter, INE data released today show. In seasonally adjusted terms, job creation increased from the previous three months, marking the fourth straight quarterly gain.
While the government’s debt load is set to hit 100 percent of gross domestic product next year, compared with 40 percent before the downturn in 2006, its borrowing costs have dropped to record lows this year.
That progress is at risk after a rout in Greek bonds last week sent yields to the highest in over two years, with the selloff infecting nations from Ireland to Spain and its Iberian neighbor Portugal.
The yield on Spain’s 10-year benchmark bonds stood at 2.21 percent at 11:30 a.m. Madrid time, while the spread with similar dated German bonds was at 133 basis points. The Ibex-35 index of leading companies has dropped about 5 percent in the past month. [Bloomberg]