Spanish jobless falls to almost six-year low amid recovery

[MADRID] Spanish unemployment fell to the lowest in almost six years in a fresh sign the economy is pushing ahead even as lawmakers struggle to form a government that can end an unprecedented seven-month political deadlock.

The jobless rate dropped to 20 per cent in the three months through June, the National Statistics Institute said in Madrid Thursday. That's down from 21 per cent in the previous quarter and beats a Bloomberg survey of economists predicting a reading of 20.3 per cent for the second quarter, reflecting the start of the summer season.

Overall, the number of Spaniards out of work fell by 216,700 people to 4.57 million total in what is typically a quarter when companies begin to hire new staff before the vacation season as well as the sales period in the retail sector.

In total, the Spanish economy has added 434,400 new jobs over the past 12 months as the recovery continued despite the political uncertainty that has dominated the nation with two elections in half a year.

Speaking after the data were released, Acting Economy Minister Luis de Guindos said he's sure the nation will end the year with unemployment below 20 per cent.

Asked about the European Commission's decision to not impose a fine on Spain after the country missed its deficit target last year, Mr Guindos said it was testament to the efforts made by Spaniards.

"I was convinced there would be no fine because it would have been unfair to the Spanish society," he told Cadena Ser radio. "Right now, we're not in 2010 and there won't be further social budget cuts in Spain."

With negotiations to form a government stuck in limbo, King Felipe is set to meet the leaders of the main political parties later Thursday, including caretaker Prime Minister Mariano Rajoy.

The monarch is seeking a better sense of which candidate could form a majority and win a confidence vote necessary to become premier and end the political stalemate.

While the 61-year-old Mr Rajoy extended his lead in a repeat election in June, he fell short of a majority and has failed to garner enough support from opposition parties. Mr Rajoy has already indicated he will turn down the King's invitation to form a government unless he counts with enough support from opposition parties to guarantee his victory in a confidence vote.

Without a government, challenges are mounting for Spain. The clock is also ticking to approve the national budget for next year before a Sept 30 deadline and the nation has yet to approve the spending ceiling, which marks the first step to approve next year's budget due September 30.

Despite the obstacles, the caretaker government expects the economy to grow 2.9 per cent this year, compared to a previous projection of 2.7 per cent.

New figures due Friday should show the Spanish economy expanded 0.7 per cent in the three months through June, according to the median estimate of 20 analysts surveyed by Bloomberg.

While that represents a slight decline from the first quarter, it's more than twice as fast as the pace of expansion forecast for the eurozone as a whole.

BLOOMBERG