MADRID (Dow Jones)--Spanish jobless claims rose again in March, adding to signs of a softening economy amid growing political uncertainty.
Jobless claims rose by 0.8% to 4.3 million in March from February, a new record high, the ministry said in a statement Monday. In annual terms, March claims were up 4% on the year. The ministry didn't give an unemployment rate, but data last week from the European Union's statistics arm Eurostat showed Spanish unemployment stood at 20.5% in February.
The poor unemployment reading comes after Prime Minister Jose Luis Rodriguez Zapatero announced over the weekend that he won't seek re-election next year, a move that could raise internal pressures within the ruling Socialist Workers Party over Zapatero's succession at a time of economic weakness.
Adding to the country's economic woes, the government's Official Credit Institute said its March consumer confidence reading fell to 68.3 from 73.4 in February. Friday, Spanish car manufacturer's association Anfac said new car registrations fell 29.1% in March.
The only bright spot for Spain has been its export sector. January goods exports rose by 25%, benefiting from strong demand elsewhere in Europe. Likewise, the country's large tourism industry has benefited from unrest on the other side of the Mediterranean, in North Africa.
Jose Luis Martinez, strategist at Citigroup, said the March jobs data were worse than expected. "In general terms, we're seeing very limited economic growth, driven by exports," adding he calculates gross domestic product rose at around 0.2% in the first quarter. The National Statistics Institute will give its first reading May 13.
Conservative opposition leader Mariano Rajoy seized on the March's rise in jobless claims to criticize the government's economic policy and reiterate his increasingly frequent calls for early elections. In a statement, Rajoy said the decision by the country's Socialist premier that he will not seek a third term in office creates political uncertainty at a time when Spain needs "stability, confidence and certainty."
His stature severely undermined by a deep economic crisis, Zapatero was pressured by his own Socialist party to make way for a successor, though he vowed to stay on until the end of his term in March, 2012.
Spain is suffering from the collapse of a decade-long housing boom that pushed the country into recession, sent unemployment spiraling and punched a large hole in public-sector accounts. The economy returned to weak economic growth last year but other sectors have not yet been able to pick up the slack from the ailing construction industry.
At a meeting with journalists, the head of Spain's social security administration said the job market should start to pick up in April and then show steady improvement in the following months as the tourism industry adds jobs for the Easter and then summer holiday periods. "The tourism industry is going to have a good year," Octavio Granados said.
UBS strategist Roberto Ruiz said he calculates Spanish jobless claims peaked in March. In the months ahead the tourism industry should create jobs, as should manufacturing industries, following a recent strengthening in manufacturing output, he said. But UBS forecasts that still high unemployment levels will weigh on consumer spending, translating into to weak GDP growth of around 0.6% in 2011 from 2010.
Source: Dow Jones Newswire/ Wall Street Journal