Spain's stagnant economy still hemorrhaging jobs

Spain's moribund labor market took a further turn for the worse in October as the activity ground to a standstill.

The Labor Ministry said Thursday jobless claims last month rose by 134,182 from September to 4.36 million. That was the biggest jump for October since 2008 when Lehman Brothers collapsed.

The National Statistics Institute's Active Population Survey released last week showed the number of people out of work rising to just short of the calamitous five-million mark as the jobless rate rose to 21.5 percent, over double the average in the European Union.

On Monday the Bank of Spain estimated that the economy failed to grow in the third quarter as activity felt the impact of the latest episode of the Greek debt crisis. Consultant Markit said Wednesday Spain's manufacturing sector contracted in October for the sixth month in a row due to a widespread fall in demand.

"These jobless figures are more in keeping with an economy that is in recession than one that has come to a standstill," Reuters quoted Spanish brokerage M&G Valores' director of analysis, Nicolás López, as saying. Since July we have seen domestic demand once again showing marked weakness, and that has a lot to do with the situation in the labor market."

The number of registered unemployed grew across all sections of the economy last month.

Lamenting the figures, Labor Minister Valeriano Gómez said: "We have seen a fall back and that is something that should be of concern to everyone." He said the latest jobless data put Spain "farther away from pulling out of the crisis." Gómez said the government coincided with the Bank of Spain's estimate of zero growth in the third quarter, adding that things are "not looking good" for the economy for the fourth quarter. "The situation is not only more difficult or worse than we had a few months ago, it is particularly delicate."

The release of the jobless figures coincided with the start of campaigning for the November 20 elections, and Gómez reiterated calls by the ruling Socialists for the European Central Bank to relax its monetary policy as part of a Marshall Plan for the region.

Shortly after Gómez spoke the ECB granted him his wish at the first monetary policy meeting presided by the bank's new president, Italy's Mario Draghi. In a surprise move, the ECB cut its key lending rate by 25 basis points to 1.25 percent. In a survey of 55 economists by Bloomberg, only four predicted a rate cut.