Spain Joblessness Falls to Nine-Year Low Amid Catalan Crisis

(Bloomberg) -- Spanish unemployment fell to a nine-year low in the third quarter, providing some good economic news for the government as it tries to get a grip on the political crisis in Catalonia.

The rate declined to 16.4 percent from 17.2 percent in the previous three months, Spain’s Statistics Institute said Thursday. That’s the best reading since the end of 2008 and beats the 16.6 percent median estimate in a Bloomberg survey.

Spain Joblessness Falls to Nine-Year Low Amid Catalan Crisis

Breaking down the data, the number of people without a job fell by 182,600 people to 3.7 million. Hiring in services, industry and construction led employment growth for the quarter.

The figures come as the central government in Madrid prepares to rein in a separatist push in Catalonia that is putting the economic outlook at risk. While a surge in unemployment to a record during the recession played a part in fueling the region’s demands for independence, an improvement in the labor market in recent years hasn’t eased ambitions to secede.

The Senate begins a two-day vote on Thursday to grant the central government sweeping powers over the rebel region. Under the proposed measures, the minority government of Prime Minister Mariano Rajoy is looking to dismiss regional president Carles Puigdemont and his cabinet while taking direct control of Catalonia’s finances.

Rajoy argues the steps are needed to protect the four-year economic recovery that has made the country a poster child for reforms in the euro area. Last week, the Spanish government cut its 2018 growth forecast to 2.3 percent from 2.6 percent, citing political risks in Catalonia, which accounts for about 20 percent of Spain’s gross domestic product, more than any other region.

Speaking after the data were published, Economy Minister Luis de Guindos said the government is anticipating a slowdown in Catalonia in the fourth quarter that may have ripple effects for the broader Spanish economy.

“A political crisis has an economic impact; it creates uncertainty and Catalonia is a very important economy,” he said on Cadena Ser radio. “We wanted to be prudent and incorporated this to our forecast.”

The government has also warned uncertainty could delay investment decisions, impact tourism figures and cause tensions in financial markets for Catalonia-based companies.

Those comments were echoed by CaixaBank SA Chief Executive Officer Gonzalo Gortazar earlier this week. The bank became one of the first institutions to swap its headquarters away from Catalonia after the illegal referendum Oct. 1. Gortazar said prolonged tensions could inflict real pain on the Spanish economy unless a solution is found.

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