Spain's Unemployment Hits 4 Year High In The Third Quarter of 2008

Spanish unemployment hit a four-year high in the third quarter of this year as tens of thousands of jobs are lost every month as the decade-long housing boom comes to an end.

According to data published today (Friday) by Spain's National Statistics Institute, the jobless rate rose to 11.33% in the third quarter from 10.44% in the second quarter. Lest we get confused here, there are two different systems for collecting data, one a monthly labour survey (based on interviews) on the basis of which the quarterly reports are prepared, and which go into the National Accounts (for GDP measurement purposes) and the monthly report from the Labour Office (or INEM). In some ways the latter give a better day to day comparison of the evolution of jobless trends, and the next one of those will be out at the start of November.

In their accompanying statement, INE said that 78,800 jobs were lost in Spain during the three months to Sept. 30. The INE also said 164,300 jobs had been lost since September of last year, and this was the first time the total number of jobs had declined on an annual basis since 1994.

Until the financial crisis began in August of last year, Spain had been one of Europe's engines of economic growth and job creation. Largely thanks to a massive home-building boom, the eurozone's fourth largest economy created over a third of all new jobs (and consumed more cement than any other single member country) in the single-currency area over the last decade.

This boom allowed Spain's historically high unemployment rate to fall to just under 7.95% in the second quarter of 2007. But as the housing boom has slowed (from January 2007) and then collapsed following the onset of the global financial crisis all this has changed. With home sales and new home starts now in free fall, the INE said 354,000 construction sector jobs were lost in the third quarter from the same period a year earlier.

According to internationally comparable monthly data released on Oct. 1 by Eurostat - the European Union's statistics coordinator - Spain had an 11.3% unemployment rate in August, the highest among the European Union's 27 member countries.

The International Monetary Fund earlier this month forecast Spanish gross domestic product will grow by 1.4% in 2008 and contract by 0.2% in 2009 after growing by 3.7% in 2007. My own view is that both the 2008 and the 2009 numbers are rather high given the pace of the contraction that we are seeing in the second half of the year, but still, at least they are in the right ballpark, which is more than can be said about the numbers we have been receiving from the Spanish government itself, where perhaps the most polite thing one can do is avoid mentioning them.

Bad Debts Rising

And as the unemployment goes up, so do the bad debts. Non-performing loans at the Valencia-based savings bank Caja de Ahorros del Mediterraneo (CAM) more than tripled to 3.2 percent in September from 1 percent a year earlier following the collapse of Spain's coastal construction and property boom. Spain's only publicly traded savings bank, CAM said yesterday (Thursday) that it faced complex financial conditions but still managed to report a 5 percent increase in net profit (to 301.5 million euros - $387.6 million) in the nine months to September. Savings banks in Spain's Mediterranean region lent heavily to real estate and construction companies during the boom, and these which now account for over 25 percent of all loan defaults as house sales and prices fall.

According to their quarterly report earlier this week, bad loans ratio at Banco Popular rose to 2.19 percent from 1.42 percent at the end of the first half, when Popular had said it expected a rise to 2-2.25 percent by year-end.

Heavy Truck Sales Fall Through The Floor


European heavy-truck sales fell 4.8 percent last month as the ongoing credit crisis and rising concern about the depth and duration of the coming recession continues to deter companies from expanding their fleets.

Manufacturers sold 28,947 trucks weighing 16 metric tons or more in September compared with 30,403 a year earlier, the Brussels-based European Automobile Manufacturers Association said in a statement today. Nine-month deliveries rose 3.5 percent to 250,580 vehicles.

Heavy-truck sales fell the most in southern and eastern Europe, led (yep, you got it) by Spain with a whopping 50 percent slide and Italy, the third-largest European market, with an 18 percent decline. Registrations in eastern Europe plunged 28 percent to 3,660 vehicles last month. Among the bigger countries in Europe, only Germany and the U.K. posted gains.