Spanish Unemployment Rises Above 15%, With Worse to Come
(Bloomberg) -- Spain’s unemployment rate rose in the second quarter, a harbinger of the bleak months ahead for one of Europe’s most troubled labor markets.
The increase in jobless reflects the fallout from the strictest part of the country’s lockdown to deal with the coronavirus. The full economic damage will be revealed on Friday, when data is expected to show that output contracted by more than 16% in the three months through June.
While the economy has gradually been opening up, the fragile recovery is facing major hurdles. Outbreaks of the virus in some regions have led to a clampdown on many activities, and the outlook continues to worsen for the economically vital tourism sector. U.K. Prime Minister Boris Johnson has ordered those returning from Spain to be quarantined for 14 days, a major blow to an industry that relies greatly on British travelers.
The second-quarter data showed that the number of jobless in the euro-area’s fourth-largest economy increased by 55,000 to 3.37 million workers. That lifted the unemployment rate to 15.33% from 14.4%. Youth unemployment jumped more than 6 percentage points to almost 40%.
Spain already had one of the developed world’s highest unemployment rates before the crisis because of entrenched structural problems in the labor market. The economic crisis has reversed some of the recent improvements, and worse may be to come.
The country’s central bank expects the rate to spike as high as 24% this year in a worst-case-scenario, and the institution’s economists don’t see it falling below 17% for at least two years.
The economy may shrink more than 10% this year, according to some forecasts, compared with about 8% for the euro area as a whole.
The latest jobless figures underplay the massive damage to the labor market that’s already occurred. The statistics office said they doesn’t reflect the high number of workers -- almost 1.1 million -- who became inactive. During Spain’s strict confinement, many workers were unable to actively look for work, so aren’t technically defined as unemployed.
The government rolled out an extensive furlough program to try to limit the damage. There were around 1.75 million workers on it as of July 1, Social Security Minister Jose Luis Escriva said in an interview with Bloomberg News earlier this month. Those furloughed workers are not counted in the jobless figures since they are temporarily suspended.
But recent flare ups in cases of Covid-19 in economically-important regions such as Catalonia have dimmed the outlook for furloughed workers. Tens of thousands of small businesses across the country aren’t expected to survive until the end of the year.
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