* Jobless rises as restaurants, hotels wind down
* Sentiment shrinks for second straight month
* EU sees unemployment at 20.5 pct in 2011
(Adds European Commission estimates)
By Paul Day
MADRID, Nov 3 (Reuters) - Spain's registered jobless rose for the third consecutive month in October as stimulus spending for the year began to run out and the boost from the busy summer period faded.
The unadjusted figures traditionally jump in October as hotels and restaurants wind down and job losses from the service sector accounted for almost two-thirds of all new unemployed, the government said on Tuesday.
Spanish jobless claims rose in October by 98,906 or 2.7 percent from September to 3.8 million people, almost a million more than a year earlier.
The economy is expected to continue destroying net jobs into next year as Spain struggles to get back on its feet and state-backed building projects draw to a close.
Spanish unemployment would rise to 20 percent next year and increase further to 20.5 percent in 2011, the European Commission said on Tuesday.
Spain does not report monthly unemployment figures, but Eurostat said unemployment stood at 19.3 percent in September compared to a 27-member average of 9.2 percent.
The government's 8-billion-euro ($11.82 billion) stimulus package, aimed primarily at out-of-work builders through tens of thousands of infrastructure contracts, created around 400,000 jobs this year.
As the finishing touches are put on road-works and city centre beautification projects across the country, thousands of contractors are returning to the nation's dole queues.
NEW MODEL
Spain's recession, not expected to end before mid-2010, is a stark contract to its euro-zone peers such as Germany, which has already started to see positive GDP growth and in October said unadjusted jobless figure fell for the fourth straight month.
"Germany is going to come out of the crisis with the same economic model it went into the crisis and we can't do that," Economy Minister Elena Salgado said during an interview on Spanish television on Tuesday.
"We can't because the construction sector, which has lost almost a million jobs, is not going to return to the same levels as before. Nor would it be reasonable for it to do so. We're suffering the effects of a bubble."
The government is launching a new 5-billion-euro stimulus plan for 2010, though it has said the cash must be directed toward sustainable long-term growth sectors, such as renewable energy, environmental tourism and new technologies.
October's figures suggested an easing in the pace of job destruction after massive lay-offs last year.
"These are non-seasonally adjusted figures and while, on the face of it, a loss of 98,000 is not good, it's better than last October which was almost double that," said RBS economist Nick Matthews.
"On the other hand, the loss is three times as large as in October 2007 and overall the rising trend in unemployment on a seasonally adjusted basis remains intact."
Meanwhile, consumer confidence slid for the second consecutive month in October to 69.2 points from 70.3 in September, the National Credit Institute said on Tuesday.
"Despite the monthly drop, October's figure is still higher than the same month last year and above the average for the first half of the year, which seems to suggest the pace of the economic slowdown is easing," the institute said. (Additional reporting by Manuel Ruiz, Sarah Morris; editing by Stephen Nisbet)