Three years after the entry into force of the labor reform, the evolution of the labor market continues to pivot on unprecedented volatility in the European Unionwhich keeps our country as the one that sends the largest number of workers to unemployment each quarter. In the second of 2024, they reached 596,000, a figure that is equivalent to 2.8% of the total employed, to which are added 552,000 others which has become inactive. In other words, they stopped looking for work..
This does not prevent a rebound in employment: Since the beginning of the recovery from the pandemic, Spain has established itself as the country that “creates” the most jobs, a trend that continues after a legal change that promised to ensure greater employment stability. But even if this promise has been kept and the turnover of the workforce has decreased compared to 2021, it has not been with sufficient intensity for our labor market to stop being a red dot in the European economy.
This volatility is not fully reflected in the Labour Force Survey data prepared by the National Institute of Statistics (INE) nor the Labour Force Survey (LFS) published by the European Statistical Office (Eurostat). Both show a positive evolution which, despite a relative slowdown in recent quarters, continues to record record figures.
The two main doubts that this development leaves are: How long will this be sustainable and what risk is there?in the face of economic ups and downs, be reversed with similar intensity to previous crises. It depends on what we can call the “structural” volatility of the labor market.
And what the data show is that the transfer between employment and unemployment and vice versa remains too narrow, despite greater contract stability, to have represented a paradigm shift. which corrects the structural weakness of the Spanish labour market in the event of a possible change in cycle.
5.4% of employees stopped working
To analyze this trend, we must resort to Labour flow statistics Eurostat. This measure shows that 1.29 million people started one new job in the second quarter of the year, a figure lower than the 1.36 million in the same period of 2023 and which is equivalent to 6% of total employment (compared to 6.4% a year earlier). A percentage lower than that of Finland and Denmark, and which largely exceeds the EU average (4%). but also 4.3% of Germany and the rest of the major economies.
The impact of these additions on employment obviously depends on the exits, the number of people who stopped working during the same period. There were 1.1 million of them. (similar figure to that of a year ago), which represents 5.4% of employment. A percentage well above the EU average, which reaches 4.4%. And in fact, almost all of the Twenty-Seven, with the sole exception of Finland (7.2%) and Slovenia (5.7%).
Countries whose volatility is not explained so much by their economic situation as by the fact that they have a labour market with a different composition to that of Spain. and with a much smaller sizeleading to more volatile statistics. What is strange and worrying is that an economy of a size like ours is recording similar levels.
In any case, our country records the lowest percentage since 2010, the date of the beginning of the historical series (a year marked by the financial crisis), which shows a positive impact of the labor reform. The problem is that the withdrawal of exits It wasn’t as intense as one might have hoped.The consequence seems clear: the “stock” of unemployed remains at high levels.
But in a context marked by phenomena such as the aging of the working population, the increase in resignations or the difficulties reported by companies in finding work, it is appropriate to question the influence of these factors. The key is to determine how many of these exits are oriented towards unemployment and to what extent towards inactivity (i.e. they are not looking for work).
Furthermore, other Eurostat statistical data seem to contradict those of Flows. Thus, data on recent job abandonments (those produced within three months immediately preceding the EPA or LFS interview) reduce Spain’s percentage to 5%, but place it at the head of the EU, which suggests that flows include job departures that are not strictly due to work-related causes.
Something that is confirmed by digging deeper into the data. Among these 1.15 million people who left the occupation, 596,000 people went directly into unemployment, equivalent to 2.8% of workers in the previous quarter, and 552,000 (2.6% of the total) became inactive.. And here you can see a difference: Spain sends more workers into unemployment than any other country. Moreover, it is one of the few countries (along with Lithuania and Croatia) where it does so with more intensity than inactivity.
This last hypothesis, which statistically would amount to “wiping out” of the job market (since he is not counted as unemployed or employed) can respond to many causes (from retirement or early retirement to resignation in order to be able to reconcile), which explain why the worker delays his active search for employment or gives up on it.
But The transition to unemployment mainly responds to the breakdown of an employment relationshipeither due to a dismissal or the end of a temporary contract (although some resignations are starting to take on weight), and the person concerned immediately starts looking for another job. And this explains the difficulties in reducing the unemployment rate, the highest in the European Union.
Where does the work come from?
This is despite the fact that Spain is the country that uses its unemployed the most to fill vacancies. Of the 1.29 million people who found employment in the second quarter, 750,000 did so because of unemployment and 545,000 because of inactivity. The unemployed who found a job represent 58% of newly employed people, compared to an average of 42% in the European Union. And that’s on top of the nearly 600,000 new unemployed people who lost their jobs.
But then why is unemployment not falling and more jobs being created? Because of the impact of a third variable in the equation: the inactive who find themselves unemployed. They added 750,000 in the second quarter, the same unemployed who found a job. Although this setback was mitigated by the shift of 584,000 unemployed to inactivity (i.e. it considerably reduces the impact of new contracts).
Indeed, the positive balance of 118,000 new jobs in the second quarter cannot be explained in terms of entries and exits if we do not take into account the fact that the number of people who worked in the second quarterwhich has already done so in the previous one increased by 685,000 peopleup to 20,256.
This percentage of jobs lasted more than three months It represents 94.6% of the total, the second highest percentage in the historical series. after the 94.7% recorded a year ago and increased by 8 tenths compared to the 93.8% recorded in the same period of 2021. This is a positive consequence of the labor reform: The greater weight of permanent jobs means that the average lasts longer.
But the percentage is still below the EU averageof 96.4% and is below the group of large European economies, such as Germany (96%), France (96.1%) and Italy (96.3%) and places it in the lower group of the EU with countries with a much smaller share of the population. What would confirm that we have a labour market that is proportionally much weaker and more volatile than what would correspond to us as the fourth largest economy in the eurozone.
