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People stand in line to enter a government-run employment office in Madrid in this file photo.ANDREA COMAS/Reuters

The number of people out of work in Spain fell by 1.2 per cent in December, labour ministry data show, marking the first monthly decline since July as the service sector stepped up hiring in the run-up to Christmas.

Thursday's data means 4.8 million people are unemployed in the euro zone's fourth-biggest economy.

The monthly figure records the number of Spaniards registered as out of work, and is considered less reliable than the country's official unemployment rate.

That rate hit a record 25 per cent in the third quarter to September, the highest since the Franco dictatorship ended in the 1970s.

The only comparable level in the euro zone is in Greece which, in recession for six years, recorded a monthly unemployment rate of 26 per cent in September.

Spain's economy is also contracting under the weight of €60-billion ($79-billion U.S.) worth of budget cuts, and expected to dip 1.5 per cent this year – likely leaving even more people out of work Prime Minister Mariano Rajoy's government, under pressure to meet budget deficit targets, has also shaken up working regulations to make it easier to hire and fire people.