Unemployment Up And Mortgages Down In December

Spanish registered unemployment topped 3 million for the first time ever in December, as the government said unemployment was expected to worsen in 2009. Comparable government figures on the number of jobless in Spain go back to 1996 but Employment Secretary General Maravillas Rojo clarified in the press conference that similar levels (proportionately) hadn't been seen since the recession of 1987, and given the large increase in the workforce since the 1980s the absolute numbers now were greater even than in the early 1980s.

The number of people out of work in Spain was up by 139,694 people, the ninth straight month of increases, giving a total of 3.13 million. Spain's Labour Minister Celestino Corbacho also confirmed that he believed the number of jobless would continue to rise in the coming months, though he hoped that this would be at a slower pace than has been recorded since October. I am not at all sure that this hope is realistic. Even though the month on month increase - 4.6% - is down on Novembers 6.08%, the annual rate - 46.93 - is still up on Novembers y-o-y of 43.72%. And with the contraction in industrial output I think it is now only realistic to expect another large wave of industrial layoffs.

Spain's unemployment now nearly matches totals in much larger economies such as Germany, where the December level was 3.18 million.

The fourth quarter unemployment rate will be reported Jan. 23 by the statistics institute, with the rate expected to rise to over 13 percent from 11.3 percent reported in the third quarter. Most analysts had expected Spanish joblessness to rise sharply in December, but were surprised by the scale of the increase which was four times higher than that registered in December 2007.

The Spanish government is still forecasting an unemployment rate of 12.5 percent for 2009, although European Union data from Eurostat confirmed only this week that Spain's harmonised rate already surpassed that figure in November - at 13.4 percent, the highest rate in the whole of the EU.



The Spanish government has launched a 10 billion euro public works and infrastructure programme to create 300,000 jobs in 2009 and currently estimates that the plan will begin to create posts starting in March. If we bear in mind that in 2008 Spain's unemployment rose by 1 million people, we can get some idea of the extent to which this will be insufficient, even assuming that unemployment only continues to rise at the same rate in 2009 that it did in 2008, an assumption which may be overly generous.

Another little detail worthy of note is that it is in fact Spain's service sector which is showing the highest level of job losses, with a current total 1.8 million jobless compared with 591,000 in construction and 400,000 in industry.


Mortgages Continue To Decline, If Slightly Less Rapidly

Spanish home sales fell at an annual rate of 28% in October, according to mortgages data released this week from the National Statistics Office (INE), this compares with a drop in mortgages of 31.5% registered in September.



The value of properties mortgaged fell by 25.3% in October. This is now the 18th consecutive month in which the number of mortgaged properties has fallen year on year, and the October total of 103,629 is now down 43% from the January 2007 peak of 181,296. And, of course, we are nowhere near the bottom yet. In the case of housing alone, the number of mortgages in October was down 33.9% year on year and the total capital loaned was approximately 8.711 million euros, or down 40.7% on October 2007.


Economic Sentiment and Business Climate Indicators plunged to record lows in December in the EU and the Eurozone

Economic confidence in the 16-country eurozone has collapsed to levels not seen in continental Europe for at least 24 years as German industry reels from tumbling global demand.In the latest evidence that the eurozone recession is still gathering intensity, the European Commission reported its “economic sentiment” index for both the eurozone and the EU had plunged in December to its lowest level since its survey began in January 1985.

In December, the Economic Sentiment Indicator (ESI) declined considerably in the EU and the Eurozone, falling by 7.0 points in the EU and by 7.8 points in the Eurozone, to 63.5 and 67.1 respectively.

Reflecting the widespread deterioration in economic sentiment, all EU countries reported weakening sentiment. Among large Member States, confidence in the Netherlands fell the most (-13.2 points), followed by Italy (-9.9), France (-8.2), Spain (-6.3), Germany (-5.3) and Poland (-4.5). The confidence indicator fell less significantly in the UK (-0.6); albeit from a very low basis and it now stands at its lowest since 1985.



Axel Weber, German Bundesbank president, has warned that fourth quarter eurozone growth data could prove worse than expected, with “downside risks” identified only last month by the European Central Bank already emerging. Eurozone gross domestic product is thought likely to have contracted quarter on quarter by about 1 per cent in the fourth quarter of 2008 and could decline by the same amount in the first three months of this year. That would dwarf the 0.2 per cent contractions seen in the second and third quarters of last year and make the recession the worst seen in Europe since the early 1970s. Needless to say, these sorts of numbers make the current forceasts coming out of the Spanish government look absolutely ridiculous.