UPDATE 2-Spain's workforce shrinks as economy speeds up

Tue Apr 29, 2014 10:03am EDT

Related Topics

* Unemployment rate edges up to 25.9 pct in first quarter

* Drop in workforce is biggest Q1 fall in at least 6 years

* Shrinking jobs market a blot on brighter economic picture (Recasts, adds comment)

By Paul Day

MADRID, April 29 (Reuters) - Spain's workforce shrank at a quickening pace in the first quarter, underlining the tough challenge the government faces in trying to sell a recovery to disgruntled voters - even after nine months of economic growth.

Winter is traditionally bad for jobs in tourism-dependent Spain, and national statistics institute data showed on Tuesday the unemployment rate rose modestly over the period, inching up two decimal points to 25.9 percent.

But numbers either working or available for work dropped by 187,000 to 22.884 million, the sharpest quarterly fall for a first quarter in at least six years. The number of employed fell by 184,600 to 16.961 million, though this was the lowest first quarter drop in six years.

Spain's economy is picking up after slumping since 2008. But its people, ground down by a jobless rate that has not dropped below 25 percent since 2012, have continued to leave the labour force in droves every month.

Some retire, but others - especially those under 25, immigrants or the long-term unemployed - go abroad in search of work or stop actively seeking jobs.

"Many young people have stopped looking. There is a large number of people who are long-term unemployed that have stopped sending their resumes and have stopped asking family and friends," said Sara de la Rica, economist at the Basque Country University and researcher at think tank Fedea.

"There's a point when people just say enough is enough. These are the disheartened unemployed."

Private sector employment and industrial jobs were both still disappearing, de la Rica said, adding that this was a bad sign for the economy, which the government has forecast will grow at an accelerating rate over the next two years.

POLITICAL FALLOUT

Spain's unemployment rate has come down from a peak of almost 27 percent a year ago. But it is still the second highest in the European Union, with almost a quarter of all those unemployed in the 28-country region residing there.

Just under 62 percent of the country's 5.9 million unemployed have been out of work for more than a year.

Centre-right Prime Minister Mariano Rajoy has repeatedly said creating jobs is his top priority after pushing through a labour market reforms, reducing a budget gap and rescuing the country's teetering banks.

His reforms have been applauded abroad and on Wednesday he will present to Brussels an improved economic outlook. But at home, support is flagging.

Rajoy's People's Party is expected to take 33.1 percent of the vote in the European elections in May, its worst showing in 25 years, according to a recent poll by Sigma Dos, published in El Mundo newspaper.

"All the recent data has been pointing to an improvement in labour conditions, and this data seems like a real disconnect from that. However, the first quarter is traditionally very bad for unemployment, which even before the economic crisis was bad," said economist at Deutsche Bank Gilles Moec.

Tuesday's figures saw some distortion from seasonal hiring during the busy Easter week - which was celebrated in the first quarter last year and in April this year.

On an annualised basis, the total number of unemployed fell by 344,900 people in the year ending in March, the largest annual drop since the third quarter of 2005 and a figure welcomed by the government.

"The improvement in the number of workers and unemployment continues and we expect that trend to intensify in the next few quarters. Through this year, a gradual creation of net jobs is forecast, in line with a recovery in activity," Economy Secretary Fernando Jimenez Latorre said.

But by then the labour pool is likely to have shrunk further.

Spain's population has fallen for the last three years, largely due to an exodus of Latin Americans and Africans who had come for work during a long building boom that imploded in 2008.

Last year the number of foreigners living in Spain dropped by more than half a million, with some immigrants returning home. Others have gone to other European countries to find work - a route that increasing numbers of Spaniards have followed for the same reason. (Editing by Fiona Ortiz and John Stonestreet)

FILED UNDER: