If employment stalls, can GDP grow?

The second quarter figures were encouraging and support this hypothesis. From the point of view of employment, it was the best quarter since the beginning of the crisis: unemployment registers dropped by 350,000. Even though second quarters have usually been favourable, the latest data marked a turning point, reinforced by an increase of almost 400,000 people in the census of workers that are affiliated to the social security system.

In order to confirm such a trend, the Economically Active Population Survey (EAPS) found a level of growth similar to that of the level of affiliation. The National Accounts data dampened such optimism, noting that full-time employment did not grow in any significant way. Thus, the quarter registered the greatest GDP increase since the beginning of the crisis, which has allowed Spain to sustain an upward trend and has also fuelled belief that GDP will grow by 25% in 2015.

Employment data for the third quarter suggests a need for greater caution: the number of unemployed and those affiliated to the social security system at the end of September is the same as the measurement taken in June. Is it possible that GDP can grow without an increase in employment?

The number of car sales and an increase in mortgage approvals show that demand is growing. However this can be attributed to consumer´s willingness to now use savings, as opposed to any broad increases in income. The latest employment figures should serve as a warning that any slowdown in the recovery may well jeopardize Spain’s budget implementation.