Spain’s unemployment rate rose to 22.9 percent, the highest in 15 years, increasing pressure on Prime Minister Mariano Rajoy to deliver on his election pledge to create jobs in a shrinking economy.
The unemployment rate rose in the fourth quarter from 21.5 percent in the previous three months, the National Statistics Institute in Madrid said today. That’s more than twice the euro-region average and exceeds the median estimate of 22.2 percent in a Bloomberg survey of seven analysts.
Unemployment “is the main source of vulnerability of the Spanish economy and this is something that we hope to start to fix in the short term,” Economy Minister Luis de Guindos said today on Bloomberg Television in Davos, Switzerland. “We have to take a lot of decisions because there are some things that don’t work properly in the labor market in Spain.”
Spain is home to a third of the euro region’s unemployed, according to the European Union’s statistics office, which estimates that half of young Spaniards are out of work. The People’s Party government, which won the Nov. 20 election after a campaign focused on jobs, has promised to overhaul labor and wage rules in the next two weeks to prompt companies to hire.
The gloomy labor news comes as Rajoy prepares to attend a Jan. 30 European Union summit that will focus on reviving the region’s economy. EU Economic and Monetary Affairs Commissioner Olli Rehn said on Jan. 24 that a “moderate recession” is indicated in the first half as governments impose austerity measures to trim deficits and reduce their debt loads.
The Spanish economy contracted 0.3 percent in the fourth quarter, the Bank of Spain estimated on Jan. 23, and may shrink 1.5 percent this year, pushing the unemployment rate to 23.4 percent.
“In this environment it’s questionable whether massively increasing austerity measures is the right thing to do,” Ben May, a European economist at Capital Economics in London, said by telephone. “The key thing for the southern European economies, the only way you’re going to see growth, is if they aren’t forced to tighten fiscal policy significantly.”
The economic news from Europe isn’t all bad. Italy sold 11 billion euros ($14.5 billion) of Treasury bills today, meeting its target. The Rome-based Treasury sold 8 billion euros of 182-day bills at 1.969 percent, the lowest since May and down from 3.251 percent at the last auction of similar-maturity securities on Dec. 28.
This continued a streak of successful short-term debt sales by Italy, Portugal, Spain, France and Belgium, smoothed by 489 billion euros disbursed by the European Central Bank in unlimited three-year loans to euro-region banks.
European struggles to boost growth while governments cut spending contrasted with the U.S., where the economy probably expanded in the fourth quarter at the fastest pace of 2011 as consumer spending picked up and companies rebuilt stockpiles, economists said before a report today.
Gross domestic product grew at a 3 percent annual pace after advancing 1.8 percent in the previous three months, according to the median forecast of 79 economists surveyed by Bloomberg News. Household purchases, which account for about 70 percent of the economy, may have climbed 2.4 percent, the survey showed.
“Confidence picked up to the point where consumers were in a better mood to spend, but not splurge,” said Sal Guatieri, a senior U.S. economist at BMO Capital Markets in Toronto. “This is a marked improvement from the growth we saw in the past four quarters. It’s a long slog, but we’re gradually improving.”
In Asia, Japan’s retail sales grew at the fastest pace in more than a year as a rebound in consumer spending propped up an economy reeling from the March earthquake and a deepening export slump.
Retail sales rose 2.5 percent in December from a year earlier, the Trade Ministry said in Tokyo today, the biggest advance since August 2010 and exceeding the 2.1 percent median forecast of 17 economists surveyed by Bloomberg News.
“Consumers are gradually regaining their appetite,” said Yoshimasa Maruyama, chief economist in Tokyo at Itochu Corp. “But we can’t rule out the possibility that declines in exports and production due to the global economic slowdown will weaken employment and incomes.”