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Spain’s Jobless Sign on at Fastest Pace in Three Years: Economy

February 02, 2012

(For more on the European debt crisis, see EXT4.)

Feb. 2 (Bloomberg) -- Spanish unemployment registrations jumped by the most in three years in January as the economy edged into its second recession since the end of 2009.

The number of people signing on for jobless benefits increased by 177,470 to 4.6 million, the Labor Ministry in Madrid said in an e-mailed statement today. That was the biggest increase since January 2009 and the total is the most since records began 16 years ago. Data last week showed overall unemployment in the fourth quarter reached a 15-year high.

Spanish Prime Minister Mariano Rajoy is battling to trim the budget deficit while nurturing growth and creating jobs in an economy home to a third of the euro region’s unemployed and where almost half of young people are out of work. Today’s data underscores the divergence of Europe’s economy as indebted countries struggle with the threat of persisting recessions while Germany enjoys unemployment at a two-decade low.

“For countries like Spain and Italy, where the fiscal tightening in the pipeline this year is immense already and there will be more to come, we do have concerns about significant contraction in output,” said Chris Scicluna, head of economic research at Daiwa Capital Markets Europe in London. “At the same time the core countries seem to be stabilizing, so the euro area is moving in two different directions.”

Rajoy’s government, elected in November on a pledge to create jobs, plans to overhaul labor rules this month to encourage hiring and reduce the 22.9 percent unemployment rate. Ministers are also battling to shore up banks, and Economy Minister Luis de Guindos will announce a plan to revamp the financial industry today at 5:30 p.m. in Madrid.

Recession Forecast

Spain fell back into a recession in the last quarter of 2011 and may contract 1.5 percent this year as the government accelerates spending cuts, the Bank of Spain estimates. Rajoy has pledged to cut the budget deficit to 4.4 percent of gross domestic product this year from an 8 percent shortfall his government estimates it inherited from the prior administration.

“With the economy now expected to be in recession over the next few quarters, employment is set to shrink for a fifth straight year,” economist Raj Badiani at IHS Global Insight Inc. in London said in a note. “Austerity measures will further reduce the number of public-sector jobs in 2012, while private- sector employment intentions continue to retreat alarmingly.”

U.S. Jobs Data

Signs the U.S. recovery is gaining traction may provide a bright spot for the global economy. Data today may show the number of people filing first-time claims for unemployment benefits probably fell to 371,000 in the week ended Jan. 28, from 377,000 in the previous week, a Bloomberg survey of 46 economists showed.

A report today showed Australia’s trade surplus soared to a record in 2011 on coal and iron ore shipments, underscoring the Reserve Bank of Australia’s expectation that Chinese demand for the nation’s commodities will help propel the domestic economy even as a global expansion slows. Exports outpaced imports by A$19.3 billion ($20.7 billion) in the 12 months through Dec. 31.

Elsewhere in Asia, Hong Kong retail sales grew 23.4 percent from a year earlier in December, more than economists forecast.

While Europe should emerge from recession in the second half of this year, the prospect of a “true double-dip” is 40 percent, Jean-Michel Six, an economist at Standard & Poor’s in London, said in a research note. He assigns a 60 percent probability that the euro area will show no growth this year and 1 percent expansion in 2013. His alternative view is for a 2 percent contraction this year and 1 percent growth next year.

“The scale continues to tilt in favor of a mild recession and a gradual return to growth,” he wrote. “Core countries will lead the way, with other member countries delivering diverging performances.”

--With assistance from Emma Ross-Thomas in Madrid. Editors: Craig Stirling, Fergal O’Brien

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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