Rajoy’s Recovery May Be Ebbing as Spain’s Election Approaches

The pace of job creation in Spain lost momentum in August, adding to signs that growth in the euro area’s fourth-largest economy may have peaked as the country gears up for a general election.

The number of Spaniards without a job rose by 21,679, the Labor Ministry said, snapping a six-month streak of falling unemployment. The number of people paying social-security contributions, a measure of employment, fell by 134,289, marking the first drop since January.

Unemployment typically rises in August as temporary staff are laid off as the summer tourist season comes to an end. From a year earlier, jobless claims were 360,000 lower.

“Today’s data confirm a deceleration of the Spanish economy,” Miguel Cardoso, chief Spain economist at Banco Bilbao Vizcaya Argentaria SA in Madrid, said in a telephone interview. “The question going forward is whether this becomes part of a trend or is just an outlier”

Prime Minister Mariano Rajoy is entering the final months of his four-year tenure in office campaigning for re-election by the end of the year on a platform of stronger growth and faster job creation. Rajoy has vowed to have 20 million people working, from the current 17 million, by the end of a second term.

The government currently sees the Spanish economy growing 3.3 percent this year, more than twice the average for the 19-nation euro zone.

Cardoso said that social-security data suggest growth will slow in the third quarter to about 0.7 percent from 1 percent in the previous three months. Economy Minister Luis de Guindos says output will maintain the same pace of expansion as in the second quarter.

“August shouldn’t make us lose perspective,” said Deputy Labor Minister Tomas Burgos, signaling that the Spanish economy has added more than half a million jobs over the past year. “This is a one-off that should not alter the trend over the long term.”

A gauge of manufacturing in Spain on Tuesday showed activity slowed for the third consecutive month in August and new orders rose at the weakest pace since December 2013.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE