Spanish Unemployment: Mondays in the Sun
The title of course refers to the Javier Bardem movie, which along with the following year’s The Sea Inside, made him one of my favorite actors, much earlier than the Coen Brothers introduced him to the U.S. audience. The movie is about unemployed men in the Spanish port city of Vigo in 2001. The IMF Press Center, the easiest data source for a poor columnist who cannot afford a Bloomberg terminal or even Ecowin/Haver, goes back to 2003. At that time, the Spanish unemployment rate was 8.8 percent, compared to the 24.6 percent Q2 figure released on Friday. So if the men were spending Mondays in the sun in 2001, they would be spending all the week in the sun today 🙁
Anyway, as you can see in the Bloomberg article on the data release, the media emphasis was on the fact that this was the highest unemployment rate ever in democratic Spain. However, I am more interested in the relationship between growth and employment: See, the average quarterly contraction in GDP over the past year has been 0.1 percent, whereas employment has decreased by 0.9 percent, on average, over the same period.
This is where I get confused: This seems like the sensitivity of employment to output has actually decreased after the recent labor market reforms, which were, by the way, rather applauded in the IMF’s most recent assessment of the Spanish economy.
Of course, four quarters is hardly an appropriate time period to judge elasticity. On the other hand, the Bloomberg article mentions that fashion retailer Adolfo Dominguez SA and cement-maker Cementos Portland SA have been able to shed off their workforce after the new laws kicked in. A friend who is a hedge fund manager was recently in Spain and talked to the CEO of one of the largest banks, who said they had been able to lay off many workers after the approval of the new law.
I take all this to mean that firms have only recently started to make use of the new labor laws. Given that Spain is undergoing austerity and many experts, including Roubini Global Economics, are expecting the country to stay in recession this year and the next, I don’t think the unemployment rate has maxed yet… The IMF sees unemployment peaking at 24.7 percent this year, and hovering above 20 percent next year, but I feel it may go much higher than that. You are free to speculate on the political and social consequences of that…
Disclaimer 1: I should not have written about the Spanish economy, as we have an in-house Spain expert here at Economonitor. Fellow blogger Edward Hugh lives, breathes and naturally knows the country much better than me, so I’d be curious to know how he feels about my gut feeling. Similarly, I’d love comments from readers as well.
Disclaimer 2: A shorter version of this post was published yesterday at the Economonitor weekly.
Disclaimer 3: As loyal readers know, this is not my first title with a movie reference, and it probably won’t be the last, either. But more interestingly, it isn’t even my first Javier Bardem reference. One of the most depressing movies I’ve seen of late- I remember leaving the movie theater with chest pains… But it was a great movie nevertheless. And Javier Bardem rocked, as usual…
One Response to “Spanish Unemployment: Mondays in the Sun”
They allnshould remember Keynes and let go of their ideological prejudices… Merkel, Cameron etc etc…