Unemployment to rise to 19.4% in 2010

The unemployment rate in Spain will rise to 19.4 percent this year and 19.7 percent in 2011, according to a report by the Banco de Espana. Job creation will not start until the ‘final quarters’ of 2011.

There are discrepancies, however, between the central bank’s report and the more optimistic assessment issued by the government, which expects new jobs to be created between late 2010 and early 2011. In another difference, the Banco de Espana said it expects the economy to contract by 0.4 percent this year, or one-tenth more than the government’s forecast. The bank is also forecasting economic growth of 0.8 percent for 2011, a figure that is one percentage point below the government’s macroeconomic forecast.

Spain’s unemployment rate currently stands at 18.8 percent according to central bank figures, making it the second-ranked country in the EU behind Latvia.

The contraction in economic activity this year and its ‘modest rise’ in 2011 will lead, in the absence of structural reforms, to a drop in employment in both years, the report said.

The central bank, however, expects job destruction to be ‘very small’ in 2011 on an average annual basis, with the labour market having a ‘temporary profile of gradual improvement.’ This positive trend will be clearer in the private sector as the government’s plans to reduce public sector employment, part of its budget consolidation programme, take effect.

Wages, meanwhile, are expected to experience ‘a very notable slowdown’ in 2010 of up to 1.5 percent and a drop of some 1.4 percent next year, the central bank said. 

John Grimmett

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