Spain’s Labour Force Survey: Employment Is Growing, but That’s Not the Real Question

Javier Molina, Markets Analyst at etoro, on Spain’s Labour Force Survey (EPA). The 10.18% is not the headline. The headline is why unemployment is rising while jobs are being created.

Spain has been growing through quantity, not productivity, for some time. More people are entering the labour market, more jobs are being created, GDP is advancing and, judging by these figures, one might conclude that everything is working more or less well. But when the labour force grows faster than employment, the unemployment rate stops falling even as the economy keeps growing, and that has a limit.

The figure that really needs watching this quarter is that full-time employment rose by 244,400 people, while part-time employment fell by 170,800. Less part-time work is usually a better sign than it seems, and it implies that the jobs being created are of higher quality, even if there are fewer of them.

Now, the catch… with inflation close to 5%, more employment does not necessarily mean more purchasing power. If wages do not keep pace with prices, consumption holds up because of the number of workers, not income per worker. And that is growing on a half-full tank.

For investors, there is a twofold reading. Domestic banks still have volume behind them (more payrolls, more lending), but consumption, which has been the engine, could start to show fatigue if inflation does not ease.

Are we looking at a healthy labour market, or one that is only growing because there are more of us?

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