Spain’s Troubling Unemployment Statistics

Spain’s statistics office continue to issue worryingly confusing press releases. The latest example is one published in connection with the quarterly labour force survey which came out last Friday.

Now the data the INE assemble in their report is very interesting, and as many observe, the complete survey gives far more reliable data about the state of the labour market than the monthly labour office signings do.

But the way they present the data isn’t interesting, in fact its downright misleading. In particular they chose not to seasonally adjust the data – which in a seasonally driven economy like the Spanish one with significant ups and downs in tourist activity doesn’t make much sense – and this omission is not only lazy, it is negligent. As I say, it is misleading, in the same way the information on VAT returns and deficit reduction progress issued by the Ministerio de Economía y Hacienda is misleading (they do not, for example, clarifying the changed VAT refunds procedure), or in the same way the notarial contracts data gives a completely topsy turvy view of movements in Spanish house prices. At best such data gives completely meaningless information, and at worst it leads reporters who cover the Spanish economy hopelessly astray.

Thus Reuters:

“Spain’s unemployment rate fell to 19.79 percent in the third quarter, the first drop since the second quarter of 2007, the National Statistics Institute said on Friday”.

In fact Spain’s seasonally adjusted unemployment (and this is the relevant number, as explained to everyone who ever attended a class in Econ 101) did not fall to 19.79 at the end of the third quarter (ie by September), but rose from 20.5% in August to 20.8% in September, the highest rate in the European Union, and probably in the developed world (you can check the complete Eurostat report on the September Labour Force Survey results here – the numbers are provided by the INE, even if they do not see fit to publish them in their own report).

And in fact, far from creating jobs during the quarter, and as can be seen in the Ministry’s own data if you look hard enough, seasonally adjusted the economy lost 30,000 jobs, and the number of unemployed grew by 65,000 (the apparent discrepancy between these two numbers is accounted for by movements in the size of the economically active population).

Even more importantly, and as reported by the Spanish website Cotizalia, of the 92,900 increase in salaried employment reported in the unadjusted data, 90,300 jobs were supplied by the public sector (and this during a deficit reduction exercise where staff contracts are in principal frozen), and only 2,600 came from the private sector.

Indeed, when we take into account the seasonal increase in tourist related employment during the summer, underlying employment in the private sector evidently shrank significantly, as suggested by the fact that (on an unadjusted basis) Spanish industry employed 18,300 people less at the end of the quarter than it did in June, and this is the sector which has to lead – through exports – the Spanish recovery.

Now let’s go back for a minute to something Monsieur Trichet said in a recent speech on Euro Area statistics. Reliability, clarity and ease of interpretation have to be key cornerstones of national statistics office policy. As he says:

“First, the reliability of the general government statistics underlying the Excessive Deficit Procedure and the Stability and Growth Pact must be guaranteed when they come out. While the government finance statistics of the overwhelming majority of the Member States is reliable, this does not yet apply to all of them. Yet as we are in a highly integrated union, we need reliable statistics not just from the majority of Member States we need it from each and everyone, no matter how large or how small the country is. We have seen that the potential for loss of credibility affects the entire union.”

and then

“we must have full assurance that the statistical indicators supporting enhanced macroeconomic surveillance are robust and timely available. We must have assurance that indicators – such as international indebtedness, unit labour costs and other indicators of competitiveness – are firmly based on accepted statistical methodologies, ideally already legislated, and that the degree of estimation in compiling them is limited”.

Essentially, the point I am making here is not that Spanish statistics are simply “falsified” in the way many argue that Greek ones are, but that insufficient effort is put into producing high quality and reliable data which helps investors, analysts and policy makers to measure what is going on, and take the appropriate decisions. Economic statistic production is not a game where you attempt to fool as many people as you can as often as you can. Nor is good statistical work a question of simply mechanically churning out reports to comply with legal requirements, without consideration of what use the end product will be – the INE’s monthly retail sales and industrial output reports come into this category, since without seasonal adjustment (which again they do not publish even though again they provide the relevant corrected numbers to Eurostat) it is impossible to tell what is happening on a month by month basis. Indeed one cannot escape getting the impression that, when we are talking about Spanish statistics, where the opportunity arises to send journalists heading off on an informational wild goose chase, this opportunity is rarely missed.

Data needs to be credible, informative, and helpful to outsiders who wish to evaluate, and take decisions. As Monsieur Trichet says, if this is not the case, the consequences can affect all members of the monetary union. Unfortunately, all too often, Spanish statistical presentations fall woefully short of these required standards.

Those wishing to read the original INE press release on the Q3 employment data, and see for themselves just how uncritically that drop in unemployment to 19.79% was reported, can find it here. Enjoy the read.

This entry was posted in A Fistful Of Euros, Economics: Country briefings by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

11 thoughts on “Spain’s Troubling Unemployment Statistics

  1. Just a quick note to remember how, in a recent article of his unrepentant Spain- trashing crusade, Edward complained that official statistics were cooked, because they were adjusted seasonally and he demanded raw data. This time Edward complains that there is raw data (as well as seasonally adjusted data as you can see if you are able to open the link) in this press release. I do find troubling this swings in the kind information that Edward wants to read. I do think he is misleading his readers. When the professionals at INE compare unadjusted figures they do it with previous unadjusted figures. When they compare seasonally adjusted figures they do it with previous seasonally adjusted figures. Their claims are nothing but coherent.

    I just wish I could read an article from Edward where he would explain how is it that Spain had 10.5% unemployment in 2001, it has 20% unemployment now (almost double) and at the same time a higher proportion of people over the age of 16 have jobs now that in 2001. How is it possible Edward? A larger percentage of people have jobs and there is double the unemployment? Think about it, Edward, because this can explain many things about the spanish economy. Particularly all those things that you do not want to see or think about: reality.

  2. PS: And it is true, Mr. Zapatero is not Mr. Cameron. In these times of hardships the social budget has increased and so has the number of teachers and doctors working for the government. There are no plans of sacking 500.000 public workers. At the same time the budget deficit has been reduced over and above the plan arranged with the European Commission. Public workers had their salaries reduced and public pensions were frozen. Of course the savings where not re-allocated to purchase airplane carriers without airplanes. That I give you.

  3. I can understand why people might feel a bit defensive about their country’s economy, but I just checked the Eurostat site, and they also have Spanish unemployment at 20%, up about a percent from a year ago. In fact, the rate seems to be increasing at roughly 0.2% a quarter.

    Incidentally, I think the most troubling thing about this posting is the way public employment in Spain is rising as private employment falls. That’s going to cause more fiscal deficit problems, and anyway it’s no way to run an economy.

    And the crack about aircraft carriers is plain silly. The catapults and aircraft simply won’t be available in time for the first carrier. That’s why it’s being outfitted as a helicopter carrier. But thanks for the expert advice on defence policy. We’re used to hearing this stuff, and we just get on with meeting our NATO obligations. I sometimes wish every country in Europe would do as much.

  4. Evidently you did not open the link. INE also says clearly that unemployment has raised from las year. It has lowered from previous quarter and only on raw data, not on seasonally adjusted. It is plainly written for anyone to read. Incidently in Spain Eurostat works in the same offices as INE.
    Regarding public employment and the way to run an economy, Spain has a long way to have the level of public employment to reach economies like Germany, France, and others… and a very long way to reach the levels of Sweden. One may like of those economies and not be so sure to say they are not well run.
    Now as I also understand that “people might feel a bit defensive about their country” (sic) I will not comment on your aircraft carriers planned to wait for ten years for any airplane of their own.

  5. Jeronimo, of course it is possible be that Spain has twice the unemployment than in 2001 and still higher employment ratio of the population above 16: the key word is participation. More women might be working now (while they were housewives before), and people might be working to a higher age before they retire. Moreover, there might be less discouraged workers, a group that does not show up in the unemployment statistics. I’m not sure whether this is the case for Spain (or which factor is most dominant), but there are plenty of possible explanations…

  6. Thank you Martin, I know it is possible, in fact is the case in Spain right now. Probably the three reasons you mention are involved. I am not saying that the level of unemployment in Spain isn’t dramatic and many things should be done about it. I just wanted to share another statistic that is not ever mentioned.

  7. Off topic bad news:

    My colleague Mark Pittaway, who has been quoted here on AFOE a few times, died suddenly this week. This is a loss to me on a personal level – it’s also a loss to the world, given how much he knew about economic history and economics.

  8. Definitely Chris … my thoughts go out to his friends and family; this was all too premature and sudden. It is a real tragedy. He was a massive presence on Eastern Europe and Hungary in particular.

    He will be sorely missed!

    Claus

  9. Pingback: Hidden Costs of Government Defaults and Bailouts Points and Figures

  10. The best cure for Spanish unemployment is to give to employers 12 euros for each employee working more than 16 hours during the week. This can be done quite simply through the VAT system.

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