Spain: Bleak forecast puts unemployment at 22% in 2010

Submitted by Edward Harrison of Credit Writedowns.

Citigroup has just released a forecast which is very troubling in regards to employment and growth in the Spanish economy.  With unemployment already having hit 17.9%, Citigroup expects layoffs to increase this to 22% in 2010.  Below is my translation of the Spanish-language article in Finanzas.

The stabilization that the Spanish labour market seems to have shown, with an increase of 0.5% in the unemployment rate to 17.9%, is only an illusion. Unemployment will continue rising, reaching 22% at the end of next year, economists estimated as U.S. bank Citigroup.

In the opinion of the experts at the company, the recovery will reach Spain later than elsewhere in Europe because of the extent of deleveraging facing the Spanish economy. Therefore, there remains a substantial possibility that unemployment will continue to rise, after the withdrawal of the effects of fiscal measures taken by the Government.

However, the company recognizes that the figures published today confirm that the pace of job destruction did slow in the spring. But a large part of the improvement occurred in the construction sector, primarily due to the impact of government support measures (Plan E).

But given the sharp adjustment that the construction sector has to face, Citi doubts much of the data that showed a real change in the trend in employment today. Ultimately, the analysts suggest that the improvement is cyclical and not structural.

According to the data released today in the Labour Force Survey (LFS) by the INE, the number of unemployed persons increased by 126,700 in the second quarter compared with the first, to 4,137,500, bringing the unemployment rate to 17.92% of the working population. The number of unemployed is a record number, the highest since 1976 when record-keeping began.

Moreover, the number of households with all members unemployed rose by 49,900 in the second quarter and 564,400 in one year, bringing the total to 1,118,300, while that of households with all members employed fell by 9 8% to 9,519,400.


Basically, things are looking bleak in Spain despite the positive spin some are putting on today’s numbers.  Hopefully my last two posts on Spain, House price declines accelerate in Spain and Hypo Real Estate need for 10 billion also reveals huge problems in Spain, give you a sense that there is more downside to come for Spain’s property sector and its banking sector. This very definitely will negatively impact the employment market in Spain.  Zapatero should feel lucky he was re-elected last year or he too would soon find himself unemployed.

Related article

El paro alcanza los 4,13 millones, el 17,9% de la población, pese al Plan E – Finanzas

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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward


  1. bb

    "According to the data released today in the Labour Force Survey (LFS) by the INE, the number of unemployed persons increased by 126,700 in the second quarter compared with the first, to 4,137,500, bringing the unemployment rate to 17.92% of the population."

    I pointed out to you before: population is not equal to workforce! not in spain, not anywhere else! yet, you are still throwing the **** at the fan.

  2. Edward Harrison

    I understand this, but I am just translating the article into English. the words are "la población activa" so I can amend this to reflect 'working population' as a more accurate translation.


  3. Keith - Hermosa

    In the blogosphere it has been widely reported that US methodology in calculating the unemployment rate has been manipulated so badly in the last 25 years that if measured by the methodology of the 1980s, we would now have an unemployment rate north of 11% or more. Does anyone know if cross border rates are comparable?

  4. In Debt We Trust

    Spain's housing market was almost as bad as Ireland's or the UK (shudder). I am patiently waiting for my chance to buy a coastal villa in Andulacia for pennies on the dollar.

  5. Anonymous

    During the Boom – Spain attracted more immigrants from South America than the US.

  6. green shot

    Check this list of top 50 US banks:

    Now, read this news:
    (State Street)
    (Capital One)
    (Marshall & Ilsley)
    (Huntington Bancshares)
    (First Horizon)

    Profits? Recovery? Try looking beyond Bank of America, JPMorgan, Citigroup, Wells Fargo and Goldman Sachs.

  7. Bruce Krasting

    Tks for the continuing info on Spain's' troubles.

    Question: Where does this go? I think that the problems in Spain (and to a lesser extent Italy) raises an important question. What is the impact of all this on the Euro??

    There must be pressure at this point for Spain and others to abandon the Euro and go back to a Peseta or a lira or a Euro II.

    Any thoughts on that?

  8. caesar

    hi everybody,

    just two points about the matter.

    first you should know that the Spanish national bureau for statistics (INE) is a govern controlled organism meaning this that the true rate of unemployment is absolutely unknown under the Zapatero's socialist regime.

    It is assumed by the most of the economics "Intelligentsia" that there are about 700k unemployees not acounted for in those official statistics. This means that the true rate of Spain's unemployment index must be close to 22% right now.

    Secondly. Very few people in the International minded public opinion knows that in Spain (concretly in the Andalusian and Extremadura regions, both governed by the socialists since Franco's death) there is a spoiled fraud named PER (Rural employment plan) through which roughly one million people (it is impossible to obtain details about the true data) gets a subsidy -or money for nothing, no matter if it is true that they really are labourers or happy housewives or simply teens hooking the class. This is what lets Mr. Zapatero's party to go winning election after election while the Country is on the cliff.

    I love my country but I'am sure that soon It will default and perhaps fall into a kind of Balkanization.

    Poor of Spain.

  9. caesar

    Respect to the possibility of abbandoning the Euro area, that would simply put Spain a step lower than Uzbekistan or so. No one of the Spanish creditors would allow it.

    Party is over and our only chance is to send Mr. Zapatero to the sewages of History. Then a painful and hard work for at least two generations of impoverished spaniards. Thi is the price of demagoguery.

    "razones para creer" (socialist slogan in last general election).

  10. FairEconomist

    Amusing to see somebody try to blame the Socialists for a housing bubble that started well before they took office. Bubble madness is inevitable with corporatist governments and it's a good thing the Spanish have a government focused on fairness and cooperation in the mess created by free-market finance.

  11. VG Chicago

    In Debt We Trust said: "I am patiently waiting for my chance to buy a coastal villa in Andulacia for pennies on the dollar."

    Yes, like 2 pennies on the dollar, but no more than that. :)
    Although, Florida might be more appealing, considering it's in a country that was not third world until 10 years ago, is not plagued by what I describe below, and is not about to explode into another civil war.

    Spain's problems are far, far greater than the deflation of their real estate bubble. The current rapid deindustrialization of the nation, with massive migration of large manufacturers to Easter Europe will likely push unemployment far higher.

    Additionally, Spain’s entitlements system is not sustainable. Somehow, the average Spaniard (usually with only a high school education) now think of himself/herself as a first world European nation, and thus expects to retire at age 60 on 4000 Euros per month. Similarly, they expect a first class fully socialized medical system, a modern infrastructure, etc. All this while maintaining the lowest productivity in Europe (if not the world), and propagating a culture of laziness and personal entitlement.

    Spain also sports an unbelievable bureaucracy and institutionalized laziness and propensity for filth. Any government-related paperwork can take years, making the idea of starting a business there absurd.

    While tourist traps like Barcelona have been cleaned up relatively well, one eventually gets tired of seeing people piss or dump trash in the streets as if we are in the Middle Ages, and so living among peasants becomes unbearable.

    Throw on top of that an overly exuberant nationalism and irrational national pride, flammable regionalism (i.e., the Basques, Catalans), an omnipresent Fascist police (Guardia Civil), and Spain really becomes an undesirable place, especially for foreigners, thus making the idea of investing in a retirement property completely absurd.

    I expect to see civil unrest in Spain next year, with some provinces demanding independence more forcefully than ever before. And, in my opinion, I think the Basques and the Catalans should demand independence. These two areas have the highest productivity across Spain, are far more civilized, and honestly have no business being with the filthy peasants of the south. If this crisis continues to deepen, only El Generalisimo can stop what may be coming.

    As I said, Florida is not only a friendlier, more civilized place, but the beaches and waterfront are far superior to that of Spain. A transatlantic flight is not longer or more tiresome than a drive from Germany to Spain.

    Vinny G.

  12. MarcoPolo

    In debt we trust: you missed that chance by 40 years.

    Bruce Krasting: No such pressure from Spain. Not so sure about Germany though.

    Caesar: I myself don’t know anything about PER. But from where I stand (US) everything in Spain looks subsidized. As also does everything in Europe in general. Lots of us would have said that’s not sustainable. But Europeans seem happy with it. Por lo menos se lo aguantan. Spain has always been “balkanized”. These things are indeed difficult for me to reconcile to my anglo/American mindset. Somehow that isn’t essential.

    Vinny: you’re way over the top.

  13. VG Chicago

    MarcoPolo: Sure, I routinely use slight – just slight – exaggeration to make my points, but what I wrote is largely true about Spain, and I know that nation quite well. It is an unsustainable nation (even politically or geographically) with a deeply engrained Latin mentality that can hardly be a competitive asset against soon-to-be 2 billion hard-working Chinese.

    I expect that soon Germans will prefer to retire in North Africa for pennies on the dollar what a similar property costs in Spain. Stranger things have happened…

    Vinny G.

  14. VG Chicago

    Anonymous said: "During the Boom – Spain attracted more immigrants from South America than the US."

    I don't know about that, but perhaps if you exclude the Mexicans (who are geographically North Americans) that might be possible.

    During the past decade Spain also attracted migrant (not "immigrant") workers from the eastern members of the European Union, such as Poland, Bulgaria, Romania. However, these Eastern Europeans are now returning to their countries in droves.

    I recently spent some extended time in Poland and Romania, and was amazed by the very, very large numbers of people returning from Spain, the UK, and even Germany. When these folks return, they usually close their bank accounts in Spain, and transfer their funds to their native lands. Upon return, they often initiated various construction projects. In fact, in Poland and Romania it is still very difficult to find construction workers.

    I suspect that just like China has largely risen as a result of a huge transfer of assets from the US through retailers such as Wal-Mart and Target, the same thing will happen in Europe. Namely, the hard-working Eastern Europeans who have broken their backs in the West, saving the very last penny they earned there, will now transfer their assets (and skills) to their native lands, leaving places like Spain and the UK to continue on their certain path toward third world status.

    Let's see if these proud Spaniards, Brits, and Frenchmen will continue to crack their stupid racist jokes about the Polish plummer or the Romanian brick-layer, when their toilets start overflowing and there will be nobody in Spain who knows how to fix it…LOL

    Vinny G.

  15. caesar

    FairEconomist said…
    Amusing to see somebody try to blame the Socialists for a housing bubble that started well before they took office. Bubble madness is inevitable with corporatist governments and it's a good thing the Spanish have a government focused on fairness and cooperation in the mess created by free-market finance.


    good morning Faireconomist:

    I have not blamed the socialist govern about the real estate bubble. In fact the Real Estate slump is not even within the biggest problems stalking the Spanish economy. But if you go through the newspaper libraries you will find that the bubble was already pointed on 2003 by Mr. Rato, former minister of finances during the José María Aznar's governments and later Manager Director at the IMF, warning the Banking system that it was time to turn off the tap. So thought the spanish socialist party on that time being one of its promises during the March 2004 elections to stop the building madness as soon as they got the power.

    Reality was that since 2004 till 2007 the growing in the housing market prices was much higher (twice the rate) than that in the Aznar's age and as far as November 2008 (just in the middle of the mess ot the credit slump) the Spanish Prime minister Mr. Zapatero was pretending in a date with American business men at Manhattan that the spanish economy was close to overtake French economy in personnal income terms and that already had overtook the Italian one.

    I do blame the socialists for their own mistakes , lies and breach of contract with the electors.

    That's all.

  16. caesar

    Hi Marco Polo,

    It is another topic about "lazy" spaniards that here everything is subsidized.

    Reality is that subsidies are allways focused to the same regions (those governned by the socislists) being its unique purpose to captive voters.

    It is true that the current welfare State is too expensive for the most of european economies and must be forthright cut down.

    Spain has allways been a diverse and culturally rich country. Now, since the socialist government need the support of the small parties at the parliament to run the country, has become in a cricket's cage in which everybody demands every kind of stupidity just basing it on misty medieval rights. No federative country in the world (USA, Germany, Canadian Federation, whoever…) has gone so far as Spain has in the transfer of competences from the central govern to the peripherial. As far as the National budget represents less than a third of the summ of the Region's budgets. This has motivated a permanent demanding stake by the regions specially due to the fact that is the central govern the one who collect the taxes (meaning this: the most unpopular) while are the region governs the most crazy and lavish spenders. This has to be stopped or the country will default.

  17. Anonymous

    Some of your comments I would agree with as a resident in Spain who runs a business in the country but many of the points you make are largely ill-thought out and smack of xenophobia. Just a few
    1. Spain's problems are far, far greater than the deflation of their real estate bubble.  – Agreed.
    2. The current rapid deindustrialization of the nation, with massive migration of large manufacturers to Easter Europe will likely push unemployment far higher – All EU countries are experiencing this as well as the effects of Chinese Growth. Still illegal US subsidies, massive tariff rises or artificially propping up failed motor companies is ok because they are American I suppose.
    3. Spain's entitlements system is a legacy of Franco and the immediate post-dictator years. Yet, in all the years I have lived here, never once have I met someone with that opinion. If anything the materialist yank mentality is still rare in Spain , fortunately. An absurd comment.
    4. Lazy Spanish. The Spanish worker works longer hours than their other European counter-parts as EU studies routinely show. In the private sector they work hard and long hours indeed. The issue is in poor management techniques and the bloated monster that is the public sector and not a culture of laziness and personal entitlement as you put it.
    5. Even the US is beginning to realise that a national health system is beneficial to the economy as opposed to the backward 'if you have money you live – if you don't you die' system of the US. Your President is currently trying to drag your country into the 21st Century as we speak.
    6. Spain accused of being 'Filthy'? From one of the biggest polluters in the world? You must be a comedian or just an idiot.
    7. Tired of seeing people pissing in the street or trash in the streets like the middle ages? All cities have dirt problems in certain parts. In central areas of all US cities it’s all touristy and clean and pleasant but move away to the poor neighbourhoods and you find the filth as well. But here Spain differs. In those 'other' neighbourhoods you don't find drive by shootings, massive drug problems, a level of insecurity unheard of in Europe in centuries and a level of poverty not seen in Western Europe for decades. These people live in the filth of the rest of your society and are just trailer trash or peasants right?
    8. Omnipresent Fascist Police the Guardia Civil? You really don't have a clue. A number of communities don't even have the Guardia Civil. Furthermore, Fascism is in part a racist ideology yet race attacks by Police are very very rare in Spain – the nice boys in Blue are a bit more active in the melting pot if the good old US of A right?  So who has the Fascist Police?
    9. Civil unrest in Spain next year? Not because of your confused opinion with regard to nationalism and regional independence but because of the economic crisis brought about by incompetent US workers in banks and other financial institutions as well as in your politics. Add to that the general Yank attitude that it’s alright to steal and commit fraud as long as you do it on a vast scale – as is the way of the Madoffs of your country all the way down it strikes me as it might be better to be a lazy spic as you are really saying than a thief from Shitsville USA?
    10. The Catalans and Basques should demand their independence? Why is that then? Due to productivity levels? Oh dear. They are far more civilised? One being the place where the last remaining active terrorist organisation in Western Europe refuses to accept democracy and kills indiscriminately and the other that without massive investment from Madrid and the fact that it is in Spain would become a failed state or economic basket case in little time. What is more, if you have ever lived in Cataluña, you will know that the population is  made up of huge numbers of immigrants especially from the lazy other parts of Spain such as Andalucía and the 'wet-backs' from South America.
     Vinny G you are a fool or just ignorant.

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