Spain sees slight increase in first quarter jobless rate

Spain's high unemployment rose slightly in the first quarter, official data showed Thursday, a reminder in an election year of the challenges the country faces as it seeks to cement a fragile economic recovery.

The jobless rate rose to 23.78 percent, according to the National Statistics Institute (INE), up from 23.7 percent in the previous quarter.

The increase is a blow for Spain's conservative government as it prepares for municipal and regional elections next month and general elections by the end of the year.

Prime Minister Mariano Rajoy has repeatedly said creating jobs is his top priority after pushing through labour market reforms, reducing a budget gap and rescuing the country's teetering banks.

The number of people out of work in the January to March period actually fell by 13,100 to 5.44 million when compared with the previous quarter, the biggest drop in unemployment in a first quarter since 2005, it said in a statement.

But the unemployment rate still rose because the size of the workforce shrank during the first quarter by 127,400 people to 22.9 million as the length of Spain's economic downturn prompted many long-term unemployed to give up looking for work or leave the country.

"The numbers have never been so clear: the long-term unemployed are stopping looking for work," said Maria Angels Valls, a professor of management at Spain's ESADE business school.

- Winter doldrums -

The government highlighted the fact that winter is traditionally a bad period for jobs in tourism-dependent Spain.

"The first quarter is the most complicated for the Spanish economy, from a seasonal point of view," Economy Minister Luis de Guindos said during an interview with Onda Cero.

The Spanish economy, the eurozone's fourth-largest, fell into recession in 2008 when a property bubble burst putting thousands of labourers out of work, and the resulting aftershock claimed millions more jobs across the country.

It grew by 1.4 percent in 2014 -- the first full-year economic growth since the property collapse -- due to a rise in private consumption, higher business investment and a recovery in the construction sector.

But unemployment is expected to remain high with the International Labour Organization predicting Spain's jobless rate remaining above 20 percent until the end of the decade.

"The risk that unemployment could remain uncomfortably high for several years is acute," said Raj Badiani, an economist at IHS Global Insight.

"The latest labour market data suggest that employment is now on an upward trajectory with firms increasingly able to ramp up their employment intentions, but the pace of recovery will still have to overcome some lingering obstacles."

The government predicts Spain will end the year with a jobless rate of 22.2 percent, one of the highest levels in the industrialised world.

The leader of the main opposition Socialists, Pedro Sanchez, blamed the rise in the unemployment rate on a 2013 labour market reform that made it easier for companies to fire workers and reduced severance pay.

He said the reform, which he has vowed to repeal if elected prime minister, "opened the doors for the mass dismissal of many workers."

Spain's unemployment rate stood at 8.57 percent in 2007 at the height of the property boom, its lowest annual level since the country returned to democracy following the death of dictator Francisco Franco in 1975.