Spain's jobless rate falls in May, but big picture still gloomy

MADRID Tue Jun 4, 2013 7:10am EDT

People wait to enter an unemployment registry office in Mataro near Barcelona June 4, 2013. REUTERS/Gustau Nacarino

People wait to enter an unemployment registry office in Mataro near Barcelona June 4, 2013.

Credit: Reuters/Gustau Nacarino

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MADRID (Reuters) - Spain's number of registered jobless fell in May but seasonal hires were largely responsible, checking government optimism that the drop heralded a turnaround for the country's crippled economy.

With chronically high unemployment a source of rising social unrest and the greatest barrier to a return to growth, Prime Minister Mariano Rajoy had showcased Tuesday's labor ministry data at the weekend, saying it would be "clearly encouraging."

It showed the registered jobless total fell by 1.97 percent or more than 98,000 people, leaving 4.89 million out of work.

The data marked a record drop for May and was "the best we've seen since the crisis began," Industry Minister Jose Manuel Soria told a conference on Tuesday.

But it excludes the long-term unemployed, and once seasonal factors such as holiday hires by hotels and farmers were added in, the drop was just 265 people.

"To say this data supports the onset of a recovery in the labor market is a bridge too far in my view," said Martin Van Vliet, economist at ING.

"It is not necessarily a recovery driven by healthy job growth. It could also be influenced by the recent trend of young people moving abroad in search of work."

At 27 percent in the first quarter, Spain's unemployment rate is the highest in the European Union after Greece, and even if the country pulls out of recession next year as economists forecast, job creation could lag for some time longer.

The rate has risen steadily along with the budget cuts and labor market reforms that Rajoy's government has introduced, fuelling public anger and sparking protests in major cities.

The link between austerity and lengthening dole queues has also created a dilemma for Europe's policymakers, and Germany's Finance Minister warned last week that failure to cut youth unemployment in particular could tear the continent apart.

JOBS DIASPORA

Spain's youth unemployment rate has soared well beyond 50 percent, and many young Spaniards have responded by emigrating in search of jobs.

Meanwhile, workers from countries like Ecuador and Colombia who had staffed a Spanish construction industry boom before a 2008 property crash have returned home or moved elsewhere.

Spain's official population fell last year for the first time since records began. If the trend continues it could improve the unemployment figures by removing jobless people from the statistics.

May and June traditionally show a drop in the number of registered jobless as Spain's holiday season begins, boosting employment in hotels and restaurants and for the harvest of soft fruit like cherries, apricots and peaches.

The labor ministry data also omits the more than one in ten of Spain's workforce that has been out of work for a year or more. Unemployment benefit stops after two years.

The National Statistics Institute, which polls registered and non-registered unemployed to produce a separate figure, showed that 27 percent, or 6.2 million people, were out of work in the first quarter.

That rate has risen every quarter since mid-2011.

Credit rating agency Fitch Ratings said earlier this month it expected the unemployment rate to peak at 28.5 percent in the first quarter of next year as government measures like wage-setting reforms took effect and a contraction in industrial output reached its limit.

(Editing by Fiona Ortiz, John Stonestreet)