June 2, 2010 / 1:54 PM / 9 years ago

UPDATE 3-Spain May jobless drops, confidence tanks

* Joblessness falls 1.8 percent vs April; fastest in 5 yrs

* Figures don’t reflect seasonal factors

* Stock market lower, bond spreads widen

(Adds detail, comment)

By Paul Day

MADRID, June 2 (Reuters) - Spain’s registered joblessness fell at its fastest pace for five years in May, data showed on Wednesday, but the economic outlook remained gloomy and consumer confidence saw a record fall in the same period.

The non-seasonally adjusted jobless number, a monthly record of unemployment benefit claimants which also includes those who have exhausted welfare payments, fell a greater-than-expected 1.8 percent from April to 4.06 million people.

Spain’s high unemployment rate — 20 percent in the first quarter — underlines the struggle the economy has faced to emerge from its worst recession in decades, sparked by the bursting of a property bubble and sliding consumer demand.

Analysts said the number was not seasonally adjusted and may not reflect the fact that some people had stopped looking for work altogether. May tends to be a good month for employment.

“It’s a good figure, and better than a rise, but I wouldn’t get too excited. It’s too soon to say the downturn is over. That consumer confidence tanked shows there are still deep problems in the economy,” said Ben May, economist at Capital Economics.

The gloomy labour and economic outlook contributed to the fastest fall on record for consumer confidence to 65.1 in May from 78.2 points in April, the National Credit Institute said.

Spain's blue-chip IBEX .IBEX stock index was down about 1.6 percent by mid-afternoon, as risk assets lost ground globally.

The 10-year Spanish/German government bond yield spread ES10YT=RR EU10YT=RR stood at around 169 basis points shortly after the data was published, from a high of around 174 bps on Tuesday, but widened again to 176 by midday.

Markets had been expecting the labour ministry figure to drop by 45,000, significantly less than the 76,223 recorded, said 4Cast economist Jose Garcia Zarate.

“This is much better than had been expected and, while we’re seeing a bit of bargain hunting for Spanish short-dated paper after the effect of the Fitch downgrade, any positive piece of news is obviously welcome,” he said.


For a graphic on Spanish unemployment, click on: here

For a story on Irish jobless claims, please click on [ID:nLDE65111Q]


Spanish labour organisations dismissed the unemployed number as irrelevant.

“The fall is similar to that seen last year from May and during the holiday months and after two months of falls, it looks like this year will follow the same trend,” Spain’s largest union Comisiones Obreras said in a statement.

The Labour Ministry figures still showed joblessness to be more than 12 percent above that recorded one year ago and more than double the level registered in May 2007.

The government, which is in the final stages of talks on labour market reforms with the unions and business representatives, cautiously welcomed May’s joblessness data, saying it showed job destruction continued to slow.

Spanish Prime Minister Jose Luis Rodriguez Zapatero said the government’s version of reforms would be presented on June 16, whether unions agree to them or not.

The country’s two largest unions have called a June 8 strike for civil servants in protest at wage cuts and have said they may call a general strike if labour market reforms, currently under discussion, affect workers’ rights.

Industrial unrest will make life even more difficult for Zapatero, who is already struggling to push major legislation through parliament and trails the conservative opposition in opinion polls.

A government austerity plan to shave 15 billion euros ($18.22 billion) from spending this year and next came close to being rejected by parliament May 27, sparking talk of early elections. [ID:nLDE650029]

Fitch cut Spain’s debt rating by one notch to AA-plus with a stable outlook late on Friday.

Spanish unemployment rates have always been high, dropping to just over 7 percent at the height of the construction boom and a reform is critical to overturn an uncompetitive and unproductive system, economists say.

Reporting by Paul Day; editing by Sonya Hepinstall and Jason Webb

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