SPANISH UNEMPLOYMENT – WORSE THAN THE GREAT DEPRESSION
By Walter Kurtz, Sober Look
The latest Spanish unemployment rate was published today. There isn’t much one can say about it other than to draw the following parallel.
Here is the chart of US unemployment rate going into the Great Depression: it maxed out at 21% – 22% (early to mid 30s).
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| US unemployment rate (source: Wikipedia) |
This is Spain’s unemployment rate now: 24.4%.
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| Spain’s unemployment rate (source: INE) |
Even with last night’s downgrade of Spanish government debt to BBB+, given these unemployment figures it is hard to see how these bonds could still be classified “investment grade”.
13 Comments
A graphical representation of a real human tragedy.
That’s 1 in 4 people.
That’s 1 in 4 people with an exploding rate of unemployment!
One figure that sums up the real problem in the eurozone countries is the youth unemployment level in Spain. The latest figures show that in February this year, youth unemployment reached 50.5%.
This figure has been criticised by some economists in Spain who say it doesn’t show the full picture. As with Greece there is a sizeable shadow economy in Spain which is where some of the young people are working.
But which came first, the under-the-counter working or the unemployment?
Professor Freidrich Schnieder, an expert in shadow economies from the University of Linz in Austria, says that the unemployment probably caused the growth of the shadow economy, not the other way around.
Spain’s youth unemployment compares badly to the rest of the eurozone, where the average is 21.5%. Economist Elvira Gonzalez says this is in part due to a high school drop-out rate. “In the years of the bubble, young people found good earning jobs in the construction sector, that’s why they left school. And when in 2007-08 the construction bubble burst, unemployment rose enormously among these young people.”
Young Spaniards are now staying on in education for as long as they can. This is why that alarming figure of 50.5% youth unemployment might even be understating the problem. Along with those registered as unemployed, there are others who would like a job but aren’t officially unemployed.
This all comes down to the definition of who is unemployed, which is a standard set by the International Labour Organisation. Unemployed people are those aged 15 to 74 who have been actively seeking work in the past four weeks.
People who have not searched for work in the last four weeks are deemed to be outside the labour force. Last year, the ILO decided to recalculate the figures from 2010 when Spain’s youth unemployment rate was at 41%.
They calculated that if you took into account people who had looked for work in the last 12 months, then youth unemployment was around 10 percentage points higher, at more than 50%.
There is some debate over whether these figures really represent the unemployed. The ILO say that some are simply “hiding out in education” or living off their parents. But are these people really unemployed, or not? It’s hard to say.
But it is clear that as the number outside the labour force grows, the unemployment figures start to tell us less and less about the true picture of those out of work.
Taken from http://m.bbc.co.uk/news/magazine-17702226
I think I’m correct in saying Spanish unemployment was as bad in the late 1980s, though. The problem of youth unemployment which Joe highlighted wasn’t as bad. Perhaps more importantly, Spain still had its sovereignty back then because it controlled its currency. I can’t see any way out for Spain without actual currency reform.
Time to convert the citizens to a carbon based fuel supply that then can be sold and the proceeds applied to servicing the debt.
Sorry..I meant convert the citizens into a carbon based fuel supply.
I am not sure that I really believe the Spanish unemployment figures. It just seems that if there were really that much unemployment, there would be much more political turmoil than we are seeing.
One possibility is that lots of Spaniards have dropped out of the official economy and gone to the cash-only economy where they get paid in cash that isn’t reported to anyone.
Also remember that in the US in the 1920′s many wives didn’t work (and even if they did it was often in very low paying jobs). But now with lots more women in the workforce, a given level of unemployment doesn’t translate to as high a percentage of “families with no income” as it did in the 20′s.
Spanish unemployment was almost as high in the late 80s early 90s, and they were not in a Depression then. There are major structural issues in some EU States. High minimum wages and legal barriers to firing workers keeps structural unemployment high. Also the absolute rate of unemployment is deceptive. What really matters is how many people have no income at all. Welfare benefits are very high in all of the EU. The USA in 1931 had no welfare benefits at all. An 8% unemployment rate in the USA could actually be worse than a 30% rate in a EU country if the unemployment benefits have run out for the US unemployed.
Unemployment hit levels around 50% during the time when Hitler took power.
IMO you need to create demand in Spain in order to overcome these problems. Get the central bank to deal directly with the people. Bypass the frozen credit markets.
Spain, like Greece would be better off outside the Euro. The country cannot effectively export the products it makes at German level exchange rates. Plus since joining the Euro prices in Spain rose to more approximate those in Europe. As bad as leaving the Euro will be for Spain, staying in will be far worse. Better some short pain, than a long drawn out pain.
Note that even during the good times of 2006-2007 Spain’s unemployment rate never dipped below 8%; housing bubble or not. Was this considered acceptable? If so, why?
http://www.econmatters.com/2012/05/22-signs-of-coming-great-depression-in.html