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Civil servants shout slogans as they take part in a protest in Madrid against government austerity measures on Aug. 24, 2012.JUAN MEDINA/Reuters

What do get when you combine aggressive public and private sector deleveraging? You get Spain, where jobs are disappearing faster than vegan animal rights activists at a bullfight.

The newest unemployment figures from the euro zone's fourth largest economy are grim. The number of Spaniards on the dole rose by more than 38,000 in August, to 4.63 million, equivalent to a 0.83 per cent increase. The rise would put the jobless rate at about 25 per cent, the highest in the industrialized world (the last official estimate, from Spain's National Statistics Institute, put the unemployment rate at 24.6 per cent in the second quarter). Youth unemployment - under age 25 - is a staggering 50 per cent and is also rising.

The bad news is that the jobless rate is bound to worsen as the cash-strapped national and regional governments fling workers out the door to trim expenses, and the private sector pays down debt. At the end if last year, private-sector debt stood at 215 per cent of gross domestic product, well above the 160 per cent danger level identified by the European Commission.

Deleveraging is the enemy of job creation. Some economists think the Spanish jobless rate will climb to 26 per cent, even 27 per cent. As the jobless rate goes up, the economy will suffer. Spain is back in recession. Its economy is expected to contract by 1.5 per cent this year, according to Deutsche Bank, and stay in recession in 2013.

The good news? Spain's unemployment rise in August, traditionally the worst month on the job front, was the smallest increase since 2006, the year when the Spanish property bubble reached its most ridiculous dimension. When it burst two years later, the Spanish jobless rate quickly doubled, then kept climbing.

The relatively small August unemployment rise may signal that the worst is over for Spain. Industrial production numbers, to be published Friday, will give another clue about the state of the economy. The output figures are bound to shrink, but if they shrink at a lower pace, the argument that the economy is bottoming out could be reinforced.

But Spain should not expect a fast recovery, for the simple reason that it lacks a currency that it can devalue when times get tough. The old Spain could bounce back fairly quickly by knocking down the value of the peseta. This time, recovery will take long, hard work and that means jobs will remain scarce for some time.