Spain jobless rate hits new eurozone record

[April 29, 2011]  MADRID (AP) -- Spain's unemployment rate rose sharply to a new eurozone high of 21.3 percent in the first quarter of the year, with a record 4.9 million people out of work, the government said Friday. The rate was the highest reported by the country since 1997.

Joblessness during the January-March period jumped 1 percentage point from 20.3 percent at the end of 2010, and adds pressure on Spain as it tries to recover from nearly two years of recession and convince investors that it can handle its heavy debt load.

The country is struggling to shift away from dependence on the construction sector, which supported growth for years until the financial crisis popped the Spain's real estate bubble, as well as make the economy more competitive and reduce national debt.

The number of unemployed people in Spain stood at 4,910,200 at the end of March, up about 214,000 from the previous quarter, said the National Statistics Institute, or INE.

In an unemployment line in a working-class Madrid neighborhood, people grimly waiting to sign up for benefit payments said they saw little hope of finding new jobs for years.

Johnny Albuja, 29, was laid off from his job cleaning offices when the company he worked for lost a contract, but only expected to get unemployment benefits for three months since he worked for the company for just one year.

Over the past year, his father and brother were laid off from a metal works company as demand plummeted.

"The situation is really difficult right now," Albuja said. "You can't live well, you still have to pay the mortgage and it's tough to get by."

The jobless rate is now at its highest since the first quarter of 1997, when it was 21.3 percent, although officials have since changed the way they measure unemployment, said an INE official who spoke on condition of anonymity in keeping with agency policy. But the overall number of people unemployed is a record, the agency said.

Jobs were lost across the entire Spanish economy, with services, manufacturing, agriculture and construction all taking hits.

Adding to the bad news for households, consumer prices rose sharply, INE said Friday. The consumer price inflation rate jumped to an annual 3.8 percent in April, up two-tenths of a point from March. Higher fuel prices prompted by unrest in the Middle East and North Africa have been pushing the rate up since January.

Spain must hold a general election by March 2012, and polls show the governing Socialists trailing badly. Prime Minister Jose Luis Rodriguez Zapatero has stated he will not seek a third term.

As much of Europe and Germany in particular recovers from the global recession, Spain is forecasting meager growth of just 1.3 percent for itself in 2011, and even the Bank of Spain says that prediction is too optimistic.

The government has said it expects job-creation to improve in the second half of the year. The second and third quarters of the year traditionally boost Spain's economy as tourists flock to the nation. Spain's tourism sector accounts for 11 percent of the country's gross domestic product.

Friday's report said the number of households in which everyone is unemployed rose by 58,000 to about 1.4 million. It is common for young Spaniards to live at home well into their 30s, in part because traditionally it has been so hard for them to find jobs.

The numbers came out on the same day the government was expected to approve a plan to crack down on tax evasion by flushing out the country's vibrant underground economy.

Many small- and medium-sized companies have workers whom they pay fully or partially under the counter to skirt tax and social security obligations, and some estimates say the underground economy accounts for 20 percent of Spanish economic output.

[Associated Press; By DANIEL WOOLLS]

Alan Clendenning contributed to this report.

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