* Spain's jobless falls on public-works programme
* Construction, industry see job gains
* Govt warns jobless may rise again in coming months
(Adds government comment)
By Paul Day
MADRID, Aug 4 (Reuters) - A huge public works programme in Spain slowed further layoffs in the beleaguered construction sector and helped unemployment claims to fall for the third straight month, the government said on Tuesday.
The number of jobless fell 20,794 in July after a 55,250 decline in June, cutting the total number of unemployment benefit claimants to 3.54 million, still the highest among much larger European economies such as Germany.
Registered jobless in the construction industry, paralysed by a punctured housing bubble, fell by 7,282, or 1.1 percent, while industry saw jobless drop by 6,911 people, or 1.4 percent.
The number of jobless in the service sector fell by 13,885 people, or 0.7 percent, as the vacation period moved in to full swing and holiday spots hired to run restaurants and hotels.
"No one can deny the seasonal effect, but it obvious too that job destruction in construction and industry is much less than it was," said Secretary of State for Social Security Octavio Granados during a radio interview.
In the first six months of 2009, the Spanish government ploughed some 5 billion euros ($7.20 billion) into local infrastructure projects as part of a total state-funded public works package worth up to 11 billion euros.
"If you look at the break down, you can see it's largely due to a drop in construction and that must be related to the government plan, because it can't be anything else," said economist at 4Cast Jose Garcia Zarate.
Government funded training plans also helped to keep welfare claimant figures down.
"Keep in mind these figures are distorted by the fact that people taking state funded, back-to-work training courses are not counted," said economist at BNP Paribas, Diego Fernandez.
SIGNS OF LIFE?
The jobless data supports claims the Spanish economy is showing renewed signs of life after almost a year of sharp contraction.
Consumer confidence in July rose to a 17-month high amid improved sentiment toward the economy, official data showed on Monday, and improvements have been reported in anything from new car and retail sales to tourist arrivals.
Sovereign debt ratings agencies Fitch and Moody's have both restated their AAA stance over the last month and have applauded the stimulus measures. See [ID:nWLA0431] and [ID:nLT203274]
However, even the government is being careful not to call an end to the slump, the worst since the end of World War Two, and many economists expect Spain to be one of the last in Europe to emerge from recession.
"The job-loss slowdown is good news, but we need more time before we can say there has been a change in trend," Employment Secretary General Maravillas Rojo said in a statement.
"It's possible unemployment will behave differently in the next few months, but if it rises, we don't expect it will do so at the same rate seen in the last few months of last year," she said.
The turnaround for job losses in the last three months does not point to any fundamental change in the negative trend, Spain's largest workers union CCOO said in a statement.
"The decline in unemployment in July is due to temporary factors. The Spanish economy still faces difficulties in the short and medium term," the union said.
Analysts agreed the brief respite in the pace of lay offs would not last long.
"The plan is not addressing the underlying weakness and why Spain is in such a mess at the moment. I don't seen where the people who relied so heavily on construction will find work once this plan comes to an end," said Zarate. (Additional reporting by Manuel Ruiz; Editing by Andy Bruce)