News Article Date: Wednesday 22nd of July 2009
Spanish unemployment is expected to reach 18.5 percent in the second quarter though the government's multi-billion-euro public works plan will help slow the pace of lay offs from the first quarter.
Six analysts surveyed by Reuters saw unemployment rising from 17.4 percent in the first quarter to between 17.9 percent and 19.5 percent in the second quarter.
The wide range reflects continuing uncertainty as the Spanish economy struggles to reinvent itself after the collapse of the construction industry.
The government has forecast unemployment of 17.9 percent in 2009 and a ceiling of 18.9 percent next year, though most analysts expect levels to pass 20 percent by 2010.
Spain's unemployment rate posted its largest quarterly jump since 1976 in the first quarter of this year and almost doubled from a year earlier to 4 million people as the recession destroyed jobs more quickly than anywhere else in euro zone.
A more moderate increase in the second quarter is largely due to public infrastructure projects worth around 11 billion euros ($15.6 billion) which have directly employed around 300,000 workers in the last couple of months, analysts said.
'It's in the construction industry where job loss has slowed, which corresponds to the (government's) infrastructure projects rather than any re-emergence of the industry,' said Citi economist Giada Giani.
The bursting of the property sector bubble has hit hundreds of thousands of low-skilled workers on temporary contracts unprotected by unions or by the umbrella of high lay-off costs for employers.
However, as the economic slump becomes more generalised across all sectors, workers holding coveted permanent contracts are also starting to be laid off.
'The decline until now has been mostly temporary contracts, but we expect the weak economy to start eating into ... permanent contracts,' said Ben May, economist at Capital Economics. 'The destruction of jobs most certainly has further to go.'
Trade union opposition has made the government reluctant to pursue labour market reforms urged by organisations such as the International Monetary Fund and the OECD.
The government is talking to unions and business associations about reducing obligatory social security payments for companies and extending dole payments.
Spanish unions have threatened a general strike if the government attempts to lower firing costs for employers, which are some of the highest amongst industrialised nations and economists say deter new hiring in economic downturns.
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