Thursday, March 06, 2008

Spain Unemployment and Consumer Confidence February 2008

We now have the February unemployment figures from INEM and the February Consumer Confidence reading from the Instituto de Crédito Oficial.

On the unemployment front, the numbers are obviously up, and in some cases substantially so. Unemployment in Spain has now risen from something over 1.9 million in June 2007 to something over 2.5 million in February 2008. The figures were up year on year by some 9.9% in Fenruary.

The regional differences area also imortant, with the year on year rises being very strong in some costal areas, like Valencia (20%) and Murcia (30%). As we can see from the comparative chart, the labour market was moving in a basically positive direction from January 2006 to May 2007, then it turned in June 2007, since which point it has been essentially a one way street of pretty bad news.

If we turn now to the consumer confidence index, we find that this has registered a slight improvement for the first time since April on the general index, which was up at 76.8 from 70.9 in January.

What we should bear in mind here are two things. In the first place we are still at very low levels, and secondly Spain doesn't *feel* like it is in any sort of serious crisis at this point in time. Of course people are aware that this is not a particularly good moment, and that the construction industry is having a bad time of it, as reflected in the employment figures. People are also aware of an inflation problem. But beyond that most people cannot conceive of what might actually be happening behind the curtains. It is election time, but what has been most notable - apart from the evident and predictable party bickering - is that the politicians have been by and large at great pains to reassure people. Of course party "x" does things very badly, and party "y" would do things much better. But no one is suggesting that under the bonnet of the car the engine might be badly broken.

In part this is because - since this is more than anything a structural crisis of the eurosystem - it is hard to attribute blame to the other, but it is also due to the fact that noone, but noone, wants to alarm people unnecessarily. Apart from the construction slowdown the problem is mainly in the financial system at this moment in time, and since an effective temporary torniquet is being applied by the weekly visit to the auctions at the ECB, blood is not visible all over the floor at this point in time. And since noone really knows what the "solution" to all of this is at this point, then disretion is the better part of valour, and better to keep mum till we do know what we want to do. Then in time honoured fashion someone will step forward from behind the curtain and announce to the stupefied spectators that a plan of action has been decided on, but that there will be no refund in the entrance price to compensate for the inconvenience. Of course this makes something of a farce out of the present elections. But quite honestly I don't see what else they could do, since little that is useful would be achieved by simply putting the fear of god into everyone.

So, and to wind this up, we could take a look at the subcomponents chart for the confidence index, where we will find that there of them turned up, and especially the expectations one given all the reassurance that people are being given, but that one - the employment outlook component - continued to move down, which is just about right if we go back to the employment data with which I started this post.

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