Employment Trends in Spain: July 2023 Labor Market Recap

After a five-month stretch of climbing prices and tight supplies, most tasks navigated a first brake. The pace never slowed in July, marking the year’s first signal of alarm amid a complex downturn. On the workers’ side, unemployment nudged up again as freelancers and independent workers faced renewed pressure. While this is further supported by new labor reforms, it hints at a shift in the cycle, with permanent contracts rising and employment stabilizing despite weak numbers. These are the key takeaways from the latest membership data released this Tuesday by the Ministries of Labor and Social Security.

Employment slowdown: Spain shed 7,365 jobs in a difficult July

Employment: a historic low for July

One of the strongest labor-market indicators in June gave way to July’s softer figures in Spain. The cooling of the job market has accelerated in recent weeks, and early signs of inflation resistance have started to appear. Spain lost 7,365 Social Security members in July, a modest decline overshadowed by the fact that the number of previously employed people never dipped. Total employment remains around 20.3 million active workers, close to a recent historical high, signaling a potential shift in the cycle and an autumn of business disruption. The burning question is how many more jobs will be lost. [Citation: Ministry of Labor and Social Security]

The decline stems from a threefold mix. First, employers emphasized hiring for the peak summer period, with results showing a positive June and a negative July. Second, the CPI crisis, until now unnoticed, disrupted earlier estimates by the Ministry of Social Security about two weeks ago. Third, there were large-scale layoffs of temporary workers nationwide. Education—a summer staple that recovered in September with no labor reform in sight—adds to the picture for the moment.

In July, 115,528 teachers, dining room staff, supervisors, and other workers operated training centers in the streets, intensifying the wave of business disruption. Employment in agriculture and construction also fell, though to a lesser extent, with the government attributing some of this to higher temperatures in recent weeks.

Unemployment: a fragile rebound and the sharpest rise since 2008

If employment edges higher in July, unemployment often slips as well, yet this month neither trend held. Unemployment rose slightly by 3,230 people, marking the first July increase since 2008. The rise kept the number of unemployed above three million, ending the month with around 2.8 million people seeking work without success. It remains the highest rate in the European Union, though it has fallen by nearly a million people over the last two years. The uptick affected men and women differently, with a 0.1 percentage point dip among men and a 0.3 percentage point rise among women.

Self-employed: entrepreneurship faces a cash squeeze

July brought higher unemployment and fewer gains for freelancers. Self-employed workers registered a loss of 10,422, the largest decline since 2009 and the first drop in five months. RETA members had shown resilience since the Covid period, reinforced by public assistance that, for the first time, became broadly available within the group. The month closed with about 3.3 million self-employed workers, even as the next months shield their numbers with a new contribution system set to take effect in 2023.

ERTE: a slight decrease

July’s data did not translate into a rise in ERTE-affected workers, even with the CPI crisis noted. This group has hovered at a steady share of the labor market for months. In July, 21,135 employees were in ERTE, roughly 500 fewer than the previous month. In other words, the figure remained practically flat despite initial inflationary pressures, and companies did not resort to this mechanism for workforce adjustments yet. Its usefulness will be tested in the fall, when employment typically dips after the summer period.

Catalonia and the Balearic Islands drive employment gains

Catalonia and the Balearic Islands stood out as the two engines of employment in July, while many other regions saw job losses. The tourism season shaped the trajectory of employment, with coastal autonomies contributing new members to Social Security, while Madrid and Andalusia led the adverse trend in business activity. Unemployment in Catalonia rose by 1 percent—the largest increase since 2009—mirroring the broader national pattern.

Employment in Catalonia rose by 13,306, roughly matching July 2019 figures, bringing total active workers to about 3.65 million, a level not seen before in the region. Girona, Tarragona, and Lleida showed substantial gains, offsetting some declines in Barcelona and other hubs, fueled by the summer recruitment drive.

Note: These observations reflect labor-market movements and policy actions during the period described, drawing on official data releases and sector analyses. (Source: Ministry of Labor and Social Security; additional context from national statistical bodies and industry observers.)