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UPDATE 1-Spanish joblessness jumps as services wilt

Published 10/02/2009, 04:54 AM
Updated 10/02/2009, 04:57 AM
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* Joblessness rose 80,367 in September to 3.7 million people

* Up 1.1 million from September 2008

* 80 percent of the month's job losses were in services

(Adds analysts)

By Jason Webb

MADRID, Oct 2 (Reuters) - Spanish jobless claims rose by 80,367 during the month of September to 3.7 million, as the storm of job destruction that has already decimated construction and industry lashed the country's service industry.

Four out of five jobs lost in the month were from the services industry, partly due to the end of summer contracts in the tourism industry and a reduction in the scale of a public works programme but also due to the knock-on effect of massive job losses that have already happened elsewhere in the economy.

"Unemployment has already risen very intensively in construction and then it rose very intensively in industry. Now it's hitting services in a big way," said Xavier Segura of Caixa Catalunya.

The scale of September's rise in the numbers claiming unemployment benefits took some analysts by surprise.

"It's a lot higher than we had been expecting, which was for about 40,000," said Jose Luis Martinez of Citigroup.

Spain only provides quarterly unemployment data, with the most recent figure, from the second quarter, being 17.9 percent. Segura expected this to rise close to a maximum of 20 percent some time next year. The economy is expected to begin to recover sluggishly only in the second half of 2010.

The European Union statistics office, which uses a different methodology, said on Thursday that Spain's unemployment was 18.9 percent in August compared to the average for the 27-member EU of 9.1 percent.

"Jobs are still being destroyed in Spain and that will continue for the next few months," said Jose Garcia Zarate, of 4cast in London.

The world financial crisis has claimed more jobs in Spain than elsewhere because of the country's long dependence on low- productivity construction and services jobs during the debt-fuelled boom that came to a sudden end in 2007.

This has led to particularly sharp reductions in retail sales in Spain and to forecasts of a continued rise in non-performing loans for banks. NPLs were equivalent to about 4.5 percent of total bank loans in June.

Joblessness was almost 1.1 million higher than in September 2008 and has roughly doubled since the beginning of the crisis despite a massive government public works programme that will push the fiscal deficit close to 10 percent of gross domestic product this year.

Some of these government-financed jobs are already beginning to go, as Socialist Prime Minister Jose Luis Rodriguez Zapatero readies spending cuts for next year in a bid to retain the confidence of debt markets.

As dole queues lengthen, government officials suspect the black market economy has expanded, posing problems for tax collectors but offering safety net for unemployed workers who might otherwise struggle to support themselves or turn to crime.

Zapatero has resisted demands from business for labour laws to be changed to make it cheaper to fire workers. This has pleased unions but angered companies who argue that job creation is stymied by rigid rules. (Additional reporting by Tracy Rucinski, Damian Wroclavsky and Robert Hetz; editing by Stephen Nisbet)

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