Forex: Spanish Unemployment Exceeds 4 Mln In January

Unemployment increased 3.1% or by 124,890 in January from December. Economists had expected an increase of just 73,500. The registered unemployment reached 4.05 million in January, with the services sector showing the largest increase. From a year ago, unemployment rose 21.6%.






Secretary General for Employment Maravillas Rojo said January was a bad month for employment. Historically, January is characterized by an increase in unemployment even during periods of growth, the official said. "The increase in unemployment is a very negative data."

BNP Paribas economist Philippe Sabuco expects Spain's employment market to continue its deterioration in the months ahead. On average, the jobless rate is expected to reach around 20% in 2010. The increase in joblessness will weigh on public finances, said Sabuco.

Given the government's austerity plan to save EUR 50 billion between now and 2013, domestic demand would be depressed further, the economist said, which could delay the end of the crisis and lead to lower than forecast tax receipts.

According to Spain's statistical office, the unemployment rate rose to 18.8% in the fourth quarter from 17.9% in the third quarter. The number of unemployed people increased 203,200, taking the jobless total to 4.33 million in the fourth quarter.

The government is set to give an outline of a proposed labor reform on February 5. While other major Eurozone economies emerged out of recession, the Spanish economy contracted 0.3% sequentially in the third quarter.