Another strong decline in Spanish unemployment likely in Q1

The Spanish labour market turned a corner over the last couple of years. After the unemployment rate peaked at 26.9% in Q1 2013, it has declined to 23.7% in Q4 - with the first positive employment growth in six years in 2014. More than 500K jobs have been created since Q1 2013 (vs. 3.7m lost during the crisis).

According to Societe Generale, a further significant reduction in unemployment to 23.2% in Q1 2015, as employment increased by close to 200K. However, this increase in employment does not show the whole story. In fact, the labour force has continued to decline, which is mostly due to a reduction in the working age population (essentially in foreign population but also structurally weaker Spanish population growth). 

However, despite the recent decline, the unemployment rate remains still significantly above the NAIRU (around 18%) which will durably weigh on wage growth.