Spain: Unemployment falls to two-year low in Q2 on services

The unemployment rate declined from 25.9% in Q1 to 24.5% in Q2. The print undershot the 24.9% rate market analysts had expected and represented the lowest rate since Q2 2012. In absolute terms, the number of unemployed came in at 5.62 million people in Q2, which marked an improvement compared to the 5.93 million recorded in the previous period and represented the lowest number of unemployed since Q4 2011. The largest increase was recorded in the services sector, which added 378,700 jobs. The number of jobs in industry (+56,700) and construction (+36,900) also improved, whereas the agriculture sector lost 69,800 jobs.

The country’s workforce recorded the largest increase in three years. It rose by 92,000 people over the previous quarter to 22.98 million in Q2. The improvement suggests that the trend of workers dropping out of the labor market may come to an end.

Despite the improvement, unemployment remains astonishingly high and continues to impact the economy, hampering private consumption. The ongoing dramatic labor market situation also translates into reduced revenues in the government’s coffers, thus contributing to concerns regarding the long-term sustainability of the country’s fiscal position.

The government expects unemployment to average 24.9% in 2014, before declining to 23.3% in 2015. FocusEconomics Consensus Forecast participants expect unemployment to average 25.0% in 2014, which is unchanged over last month’s projection. For 2015, the panel foresees an unemployment rate of 23.9%.