Research Dept. News
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Monthly Report, num 344 - March 2011
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Spain: overall analysis - Labour market
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The labour market situation continues to worsen
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Almost 140,000 jobs lost in the last quarter of 2010.
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The weak recovery in economic activity prevented the labour market from reactivating in the last quarter of 2010, as shown by the figures from the labour force survey (LFS). In fact, due to the declines recorded in services and the construction industry, employment fell by 138,600 people in the last quarter of 2010 with a total of 18,408,200, bringing the year-on-year drop in the employment level to 1.3%. These figures confirm the inability of the labour market to generate employment in the fourth quarter of the year.
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One sign of the labour market's continuing weakness can be seen in the trends in the private sector, the largest employer and providing a more accurate reflection of the extent of the economy's dynamism. Consequently, the labour market is not expected to consolidate its recovery until the private sector can create jobs. Almost 340,000 jobs were lost in this sector in the fourth quarter compared with the same period the year before and, although this drop was a third of the figure recorded for the previous year, job losses continued apace. On the other hand, public administrations and corporations created employment, around 100,000 jobs.
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The private sector continues to lose jobs except in Catalonia, Extremadura and the Basque Country.
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However, the significant differences should be noted between autonomous communities in terms of employment trends by sector. While salaried workers in the private sector fell by 2.2% year-on-year in the fourth quarter of 2010, the Basque Country, Catalonia and Extremadura saw positive rates. These regions' generation of private sector jobs might point to a change in trend over the coming months, particularly if this somewhat more favourable performance is passed on to the rest of the economy. For its part, employment in local government bodies grew by 3.4% year-on-year, with marked rises in the Basque Country, Madrid, Asturias and Navarre, while public sector employment fell in Aragon, Catalonia, Extremadura and La Rioja.
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Employment in the services sector rises 0.2% year-on-year in the last quarter of 2010.
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Another sign that the recovery in the labour market is still weak is the listless trend in services, this being the sector employing the highest number of workers. More than 115,000 jobs were lost here in the last quarter of 2010, although part of this decline was expected due to seasonal factors. Nonetheless, in year-on-year terms the figure was positive for the services sector, up by 0.2%, while employment data for the industrial sector were a little more optimistic, rising in the fourth quarter by around 22,000 jobs. Insofar as economic recovery depends on exports, a more favourable trend in foreign sales might boost the manufacturing sector due to its export orientation, and this could result in a slight improvement in the labour market.
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After the worsening labour market figures for the last quarter of 2010, the first few months of this year will be decisive in judging whether the recovery is still at a standstill or whether, on the other hand, economic reactivation is finally putting an end to job losses. As shown by the average monthly figure of new employment registrations with Social Security for January, the labour market is likely to go on improving very gradually. According to the Ministry of Labour and Social Affairs, total registrations were down by 223,143 people over the previous month, standing at 17,361,839 (a zero change once seasonally adjusted). The monthly figures by sector, seasonally adjusted, show that only the services sector generated some employment in January, while the industrial and construction sectors continued with job losses, albeit less sharply.
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Returning to the LFS, in the fourth quarter of 2010 employment trends were more favourable for women than men, as the former work in the sector that performed better last year, namely services. The year-on-year drop decreased to 0.1% for women and held steady at 2.2% for men.
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A Royal Decree-Law is passed with guidelines to promote employment.
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With regard to age, the sharp fall in employment among those under 25, down 11.7% year-on-year in the fourth quarter, led to a Royal Decree being passed on 11 February with a shock plan to promote stable employment. Among other measures, it promotes part-time contracts for young people and the long-term unemployed, with lower company contributions to Social Security for twelve months. This programme also provides for a bonus of four hundred euros for those who have run out of unemployment benefit, provided they carry out employment guidance and training actions. The unfavourable trend in unemployment figures, up by 121,900 people in the fourth quarter to 4,696,600, partly explains why this shock plan was passed relatively quickly. Of note is the very high unemployment rate among young people, reaching 42.8% this quarter.
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Lastly, regarding labour policy, we should also note the pension reform agreement reached this month between the government, trade unions and employers. This raises the retirement age to 67 and the number of years' contributions to Social Security to 37 in order to be entitled to a full pension. Moreover, a minimum of 38.5 years has been established for workers wanting to retire at 65 years, with an increase in the mandatory contribution period to calculate pension entitlement from 15 to 25 years and delaying early retirement to 63. These reforms will come into force in 2013 but will be applied gradually, becoming fully applicable in 2027.
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