Get the job done

No room for complacency on Spanish jobs

Spain is creating jobs at a healthy clip. The economy added 412,000 new jobs in the second quarter of the year, the highest quarterly increase in a decade. But with an unemployment rate of 22.4 per cent, there is no room for complacency.

The latest numbers are certainly encouraging. The jobless rate dropped despite an expanding labour force. The newly created positions were full-time and in the private sector. The bulk of jobs created was in services, but employment grew across all sectors. Labour reforms seem to be working. The government of Mariano Rajoy can boast that the number of jobless is lower than when it took power in 2011. Buoyancy in the job market reflects Spain's strengthening economic recovery. The government expects GDP growth of 3.3 per cent this year.

For all that, reforms are still needed to address three major problems. The first is that 2.3 million of the 5.1 million unemployed people have been out of work for more than two years. The number has been slowly shrinking since last year, but many of these long-term unemployed are low-skilled workers with bleak job prospects. Consulting firm Freemarket calculates that the expansion of this unfortunate group explains some 70 per cent of the rise in income inequality in Spain.

Then there is the persistent split between employees with bullet-proof permanent contracts and those stuck with temporary contracts. The proportion of workers with the inferior protection is 25 per cent, the highest percentage since the third quarter of 2011. Permanent hires are still expensive and risky, thanks to high severance payments and judicial uncertainty around collective dismissals. A temporary position is better than no paid work, but the division makes for an uneven recovery and a less productive economy, since firms invest less in training short-term hires.

Finally, the unemployment rate among 16 to 24-year-olds remains alarmingly high. It slipped below 50 per cent for the first time since 2011, but only to 49 per cent. That's more than double the euro zone average.

The numbers are going in the right direction. But Spanish politicians must recognise that rising GDP will not fix the job problem.