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The Globe and Mail

German and Spanish jobs – to have and have-not

People wait in line to enter a government-run employment office in Madrid Jan. 3, 2013. The outlook for 2013 from analysts is jobs growth in Germany and further joblessness in Spain.


Anyone needing a New Year reminder of the divide that has been threatening to tear apart the 17-nation euro zone need only look at Thursday's German and Spanish jobs data.

To the north, work. To the south, unemployment.

The number of Germans out of work actually rose for the ninth month running in December, reflecting some of the strains of the euro zone debt crisis on Europe's largest economy.

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And Mediterranean Spain's official tally of those out of work fell in the month.

But both figures are belied by other factors.

Germany's jobless number, for all its recent rises, remains close to a post-reunification low. Spain's improvement was based almost entirely on temporary holiday jobs. Around one-in-four Spaniards are out of work.

The outlook for 2013 from analysts is jobs growth in Germany and further joblessness in Spain.

The labour success in Germany – unemployment rate around 6.8 per cent – is partially thanks to years of wage restraint and structural reforms undertaken in the mid-2000s.

Spain, the euro zone's fourth largest economy, only passed a labour reform in February 2012, under European Union pressure to meet budget deficit targets.

Spanish Prime Minister Mariano Rajoy's jobs reform has shaken up working regulations to make it easier to fire people, leading to massive lay-offs at big companies like media group Prisa SA and expected cuts at Spain's national airline, Iberia Lineas Aereas de Espana SA.

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On Thursday, Spain's Parador hotel chain said it was dismissing 350 workers, a hit to even one of the country's more robust sectors.

Permanent hiring in Spain, meanwhile, has yet to pick up despite efforts to make the system more flexible.

While the number of people out of work in Spain fell by 1.2 per cent in December mostly thanks to the holiday hiring, according to labour ministry data, analysts were not optimistic for a change in trend in the damaged job market.

"We expect renewed job losses at the start of 2013, with the latest lead indicators suggesting the economy is set to endure further output losses in the first half of 2013," said IHS Global Insight analyst Raj Badiani, forecasting a further labour shakeout.

Spain's economy is contracting under the weight of €60-billion ($77-billion) worth of budget cuts, and expected to dip 1.5 per cent this year – likely leaving even more people out of work.

Spain's latest jobless data means 4.8 million people are registered as out of work, but the figures are considered less reliable than data from the National Statistics Institute (INE).

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INE recorded 5.8 million Spaniards out of work in the third quarter, putting the country's unemployment rate at a record 25 per cent, the highest since the Franco dictatorship ended in the 1970s.

The only comparable level in the euro zone is in Greece which, in an economic depression for six years, recorded a monthly unemployment rate of 26 per cent in September, meaning that it may by now have jumped ahead of Spain.

Also of concern in Spain is a decline in the number of Social Security contributions in December, which analysts said may reflect the exodus of immigrants now seeking brighter prospects outside Spain.

Standing outside a Madrid employment office, 57-year-old truck driver Antonio Pino lamented his situation at a company that has implemented an 18-month layoff plan during which employees work for two months and go on the dole for a month.

"It's devastating living like this. In one sweep the government has wiped out everything we'd worked for during the past 30 years. Another 25 years will have to pass to get to where we were just a few years ago," Mr. Pino said.

A Spanish association of temporary work companies called AGETT expected firms to hire 500,000 temporary workers over the Christmas period, compared to 550,000 the year before in anticipation of lower spending from cash-strapped consumers hit by tax increases and no seasonal bonus for civil servants.

"We're pretty negative on the outlook for 2013 and expect unemployment to be over 27 per cent," AGETT analyst Alejandro Costanzo said. "We're going to hit the bottom in 2013, then in 2014 we'll see what effect the government measures have."

In Germany, recent economic data has been mixed but Timo Klein at IHS Global Insight said he expected joblessness to fall once again from mid-2013, after rising at the start of the year.

Meanwhile, new applications for short-time work in Germany are estimated at 45,000 for December, roughly as in October and November but almost double the average of 26,000 seen during the first half of 2012.

Wage restraint and labour market reforms have pushed the German jobless rate down to a 20-year low, and the country's model is often cited as an example for European nations seeking to cut unemployment and become more competitive.

But critics say much of the resilience of Germany's labour market is due to reforms that broadened and entrenched the low-paid and temporary work sector, boosting wage inequality.

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