Unemployment falling – or is it just seasonal work?

Youth unemployment fell 2.3%

According to figures released by the Labour Ministry unemployment in Spain fell by 0.63% in May compared to the previous month.

However, compared to the same time in 2011 unemployment increased by 12.5%, or 524,463.

The figures also suggest that youth unemployment decreased 2.3% in May representing 10,429 young people returning to work. Youth unemployment, people aged between 18 and 24, has been the subject of embarrassment for Spain with over 50% looking for work.

However, although the figures are encouraging we must not forget that Spain has a huge seasonal-work sector. As the sun comes out and the tourists touch down all the bars, restaurants and nightclubs begin increasing their staff to handle the onslaught of fun seekers descending on them throughout the summer.

Those jobs, however, are usually only temporary – from June to September – and once the summer is over these workers will rejoin the jobless.

According to figures from the European Union Spain currently has the highest unemployment rate in the eurozone at 24.3%.

“We find ourselves in a second phase of recession, which, even if it is not as brutal and deep as the first, has had a negative impact on employment,” said Engracia Hidalgo, the Spanish junior labour minister.

Prime Minister Mariano Rajoy has been forced to pass billions of euros of spending cuts and tax increases as part of efforts to reduce the country’s debt levels. Some analysts believe these have had a negative impact on employment, and the economy.

Spanish manufacturing declines

Manufacturing in Spain fell at the fastest rate for almost three years, according to Markit’s Purchasing Managers’ Index (PMI).

The PMI of manufacturing companies in Spain stood at 43.5 in April, down from 44.5 in March, and completing a full year below 50, the point which signifies growth in activity.

Markit’s press release summarised the results as follows:

Operating conditions in the Spanish manufacturing sector deteriorated sharply again in April. New orders fell at a substantial pace, while the rate of contraction in output accelerated. Spare capacity led to further reductions in backlogs of work and employment. Meanwhile, firms lowered output prices in the face of strong competitive pressures and weak demand, despite robust input cost inflation.

The seasonally adjusted Markit PurchasingManagers’ Index^® (PMI^®) – a composite indicator designed to measure the performance of the manufacturing economy – fell for the third month running in April, posting 43.5, from 44.5 in March. The latest reading signalled the fastest worsening of operating conditions since June 2009.

New orders decreased at a considerable pace that was broadly unchanged from that seen in March. Panellists reported falling demand, particularly from domestic markets. New export orders also decreased, and at a marked pace.

According to respondents, lower new business and the current economic crisis in Spain contributed to a fall in output. Production has decreased throughout the past year, and the latest fall was the strongest since October 2011.

Spare capacity was again evident in the sector, with both backlogs of work and employment falling during the month. Although the rate of job cuts eased for the second month running, it remained marked.

Cost inflation was recorded for a third consecutive month in April, although the pace of increase slowed and was weaker than the survey average. Respondents indicated higher raw material prices, with fuel and plastics widely mentioned.

Output prices continued to fall, however, as strong competition and weak demand largely prevented firms from raising their charges. Output prices have fallen in each month since August 2011.

Spanish manufacturing firms cut their purchasing activity at the fastest pace in 2012 so far. The reduction in demand for inputs led to an easing in pressure on suppliers to the sector. Consequently, suppliers’ delivery times lengthened only fractionally, and at the weakest pace in the current 31-month sequence of deterioration.

Manufacturers indicated a preference for tighter stock management in April. Pre-production inventories fell at a marked pace that was the fastest in 27 months.

Stocks of finished goods decreased at a solid pace that was broadly in line with that seen in the previous month. Where post-production inventories fell, this was linked by panellists to a steep decline in production.

Andrew Harker, economist at Markit and author of the report, said: “The Spanish manufacturing PMI remained well below the 50.0 no-change mark in April, continuing the trend of worsening business conditions in the sector. In fact, the PMI even moved slightly further away from 50.0 during the month. The acceleration in the rate of contraction in new orders seen in March was followed up by a similar trend in the output index in April. Further price discounting at manufacturers appeared to have a limited impact on sales, with new orders falling at a substantial pace over the month.”

About PMIs

Purchasing Managers’ Index^® (PMI^®) surveys are now available for 32 countries and also for key regions including the Eurozone. They are the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to www.markit.com/economics.

The press release can be downloaded here: Market Spain Manufacturing PMI