People in line outside an employment agency in Spain (photo archive). (EFE)
In the second quarter of the year, Spain’s economy shrunk by 1.3 percent year-on-year. However, these may not be the most negative numbers. In a year, about 801,000 jobs disappeared, which equals a loss of 4.6 percent, ending up with 16.6 million employments.
Also, after seasonal adjustments related for instance to the fact that employment usually increases during the tourist season, the recession is even more serious, with the gross domestic product falling by 1.6 percent.
The job destruction is still very high in the construction sector, with a loss of 21.3 percent of employments, which means 303,000 unemployed. The major increase in absolute numbers has occurred in the service sector with 350,000 lost jobs, particularly in the financial sector.
In the real estate sector, surprisingly, there has been a growth of employment by 4.5 percent, a trend that started already in 2011. In the information and communication sector, employment has also increased, despite the crisis and the numerous EREs, a form of collective termination of contracts that can be used under special circumstances, among media groups.
Reduced working hours
The job destruction is happening fast, but so is the reduction of working hours, which dropped from 3.5 to 3.7 percent from the first quarter.
“The companies use EREs to maintain their staff but to reduce costs and the labor reform has facilitated that this practice is extended to the service sector, where it is known as the German model,” according to José Carlos Díez, chief economist for Intermoney, a Spanish financial consultancy group, “This model and this kind of flexibility is always positive when demand returns. If sales don’t return, the destruction of employments is simply delayed and the workers will have used up part of their unemployment benefits.”
According to a press release from the INE, the Spanish national statistics institute,“from the quarterly GDP growth and the employment statistics, it can be deduced that the year-on-year variation of the productivity per equivalent number of employments increases by 0.4 percentage points, from 3.1 to 3.5 percent, while the production growth per effective working hour is reduced by 0.5 percentage points, from 3.0 to 2.5 percent.”
In other words, despite the increased unemployment rate, the fall in production means that productivity begins to fall again, contrary to what a majority of experts say when arguing for how to exit the crisis.
Moreover, the sharp decline of the GDP – by 0.4 percent from the previous quarter and 1.3 percent year-on-year – is even more serious if the seasonal adjustments are not taken into account. In that case, the Spanish economy would have fallen 1.6 percent during the last 12 months, which means that the recession is accelerating compared to the 0.6 percent of the first quarter this year and 0.4 percent of the last quarter of 2011.
Household consumption dropped by 2.3 percent and that of public administrations by 3.2 percent. Investments dropped by 9.6 percent without corrections and reached a record low for the construction sector by 12 percent since the crisis begun. Measured this way, export increased by 3.1 percent and imports dropped by 5 percent.
This article was translated and edited by Stina Lunden.
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