* Unemployment rate picks up in first quarter
* Spain to hold second election in June
* Politicians disagree on tactics to fix job market (Recasts to focus on effects of political uncertainty)
By Sarah White
MADRID, April 28 (Reuters) - Spain’s unemployment rate ticked up slightly in the first quarter of the year, suggesting the country’s most pressing economic problem is as deep-seated as ever as it enters its fifth month without a government.
Adding grist to a debate over how soon the policy vacuum may start to impact what has been a solid economic recovery, the jobless rate - the second-highest in Europe after Greece - hit 21 percent, up from 20.9 percent a quarter earlier, data showed on Thursday.
Spaniards are preparing for an election re-run at the end of June, after the rise of new parties following a double-dip recession — and in a labour market that has remained stubbornly dysfunctional — produced a hung parliament in a ballot in December.
Politicians on the right and left failed to forge a viable coalition in the ensuing four months. Their disagreements over economic strategies, including the course labour policy should take, are likely to dominate the new round of campaigning.
For some of those struggling to make ends meet, like 54-year-old Juan Manuel Arades, the situation is worse than ever despite signs that job creation is continuing.
Since losing his position of 21 years at a transport company some eight years ago, Arades has only been able to find sporadic work, and his last job ended in December.
Next month his unemployment benefits will have run out, while his wife’s 10-month contract at a school ends in June and is too short to allow her to accrue any subsidies.
The pair may be able to apply for help from various emergency schemes, though many people struggle to qualify.
“When it comes to unemployment no-one really does anything,” Arades said.
He may vote for former communists Izquierda Unida (“United Left”) again - a party which could team up on a joint platform with anti-austerity Podemos (“We Can”).
But he would have preferred to see politicians, even those he did not back, agree on a coalition.
“We’ve been going around in circles for four months. Every time it’s harder to motivate yourself to vote,” Arades said.
A 2012 labour reform by the centre-right People’s Party (PP), which won the most votes but lost its majority in December, is credited by many economists for helping a jobs recovery after Spain exited the downturn in mid-2013.
The overhaul enabled employers to lower wages and cheapened firing costs, and unemployment has come down from a peak of nearly 27 percent.
But other parties, including the second-placed Socialists, have sought to revert the changes, arguing they make workers poorer, and leaders are struggling to agree on how to fix an endemic over-reliance on short-term contracts.
Thursday’s unemployment data from the National Statistics Institute (INE) showed most of the jobs created over the past 12 months were temporary.
The first quarter is traditionally a poor one for the labour market as Christmas hiring tails off, and most economists believe labour creation will continue at a robust pace of at least 2 percent this year in spite of the political uncertainty, helped for instance by a bumper summer tourism season.
Some also pointed to encouraging employment trends in industry at the start of the year.
But they also warn more should be done to fix the two-tier employment market and get the long-term unemployed back into work.
“Given the lack of broad political consensus on the needed labour market reforms, it may prove challenging to continue with the reform agenda,” Apolline Menut, an analyst at Barclays said in a note. (Editing by Julien Toyer and John Stonestreet)