The unemployment figure that was released yesterday was one of the best pieces of news coming out of Spain´s labor market for a long time. But it does not show that Spain´s workers are out of the woods.
According to the Labor Ministry, unemployment fell for the third month in a row at the highest rate observed in some time in Spain, to 4.1m people. The decline was especially significant in the service sector. At the same time, employment rose by 1.15% over the previous year.
Most observers of Spain´s labor market expected the June figure to be good, given the usual rise in hiring in the tourist sector and thanks to the political difficulties that are keeping tourists in Spain rather than other sunny destinations (e.g., Tunisia, Egypt). This effect could last to the beginning of the fall and is clearly good news for Spain.
But yesterday´s figures, when seasonally adjusted, show that unemployment continues to rise and employment to fall in Spain. Of the hirings, an unusually large percentage were part-time and only 7% were given permanent contracts.
These two features show the persistent uncertainty of companies who need workers.
What could clear away this uncertainty would be a decisive move toward labor-market reform. The government should seize the moment, reach a bipartisan consensus and take radical steps. If this is not done, we will return to bad news in October, and the bad news is likely to last.