Spanish unemployment fell to 9-year low in Q3 2017, providing good economic news to the government trying to cope with the political crisis in Catalonia. The unemployment fell to 16.4% from 17.2% in the previous three months, according to the Spanish Statistical Institute. This is the lowest level since late 2008 and exceeds the 16.6% unemployment forecast of the economists and market participants.
A deeper look at the data shows that the number of people without work has decreased by 182,600 to 3.7 million people. The recruitment of new employees in the service, industrial and construction sector led to quarterly employment growth.
The figures we published at a time when the government in Madrid is trying to withstand separatist pressure in Catalonia, which puts at risk the country’s economic prospects. While the rising unemployment during the recession has influenced the region’s desire for independence, the improvement of the labor market over the last few years has not appeased its ambitions.
Prime Minister Mariano Rahoy’s minority government is trying to release Catalonia’s regional leader, Carles Puccemon and his cabinet, while taking direct control over Catalonia’s finances. Rahoy argues that steps are needed to protect the four-year economic recovery, which has turned the country into an example of reforms in the Eurozone. Last week, the Spanish government cut its growth forecast for 2018 from 2.6% to 2.3%, due to the political risks in Catalonia, which generates about 20% of Spain’s gross domestic product.
Speaking after the release of the data, Economy Minister Luis de Guindos said that the government expects a slowdown in economy growth of Catalonia in the fourth quarter, which may have shocking effects on the entire Spanish economy.
The government also warned that uncertainty could slow investment decisions, affect tourism data, and trigger financial market tensions for companies based in Catalonia.