For anyone convinced that yesterday's S&P two notch downgrade of Spain to A is the last one for a while, we have some bad news: in Q4 Spanish unemployment soared by the most since the Lehman collapse, hitting what new PM Mariano Rajoy called an "astronomical" 5.4 million. This compares to 4.978 million people unemployed at the end of Q3 2011. Since the official number is not yet public and will be released on January 27 we will take his word for it. In which case it becomes clear that in Q4 the Spanish economy experienced a Lehman-like collapse, losing more than 400K people, or the most since the bankruptcy of Lehman brothers. In percentage terms this means that Spanish unemployment rose by a ridiculous 2%, or from 21.5% to 23.3%, in one quarter! And since Spain is a country of the Keynesian persuasion, we can only assume the number includes a whole bunch of meaningless birth/death and seasonal adjustments, but we'll leave it at that. Incidentally, it means that by the time the mean reversion exercise, with cost-cutting and what not is complete, Spanish unemployment will be well north of 30%, and 2 out of 3 people aged between 16 and 25 will be out of a job, if ot more. It also begs the question just what the real unemployment picture in the US, which lately has put the Chinese Department of Truth to shame, would be if reported on a realistic, unadjusted, and not "workforce contracted" basis. The chart below shows you everything you need to know.
This is what quarterly Spanish unemployment looks like pre-BLS "intervention"
[8]
From AP [9]:
"This year (2011) is going to close with 5.4 million people... who want to work but cannot," Rajoy said, anticipating official unemployment data due to be published on January 27.
"It is an astronomical figure," he said in a speech to supporters of his conservative Popular Party in Malaga, southern Spain, in which he reaffirmed fighting unemployment as his top priority.
"This is our challenge and all our efforts and all our policies are going to be dedicated to this," he said, without giving a new percentage rate.
Economists have warned that Spain may be back in recession with the economy likely to contract in the first quarter of 2012. The Bank of Spain said the economy shrank in the last quarter of 2011.
As a reminder, S&P said there is a substantial chance it would lower Spain even further:
"We could lower the ratings again if additional labour market and other growth-enhancing reforms are delayed or we consider them to be insufficient to reduce the high unemployment rate."
Time to start pricing in the transition from spAin to sBain?