Spain’s job market cooled in June but kept hiring at a steady pace
Spain’s labor market showed signs of cooling in June. Hiring continued, yet the pace slowed over several months, sparking questions about how labor indicators will evolve in the second half of the year. Until now, the sector enjoyed a virtuous cycle, offering a rare mix of high contract volume and strong quality.
Concerns about a tougher winter after a robust spring have grown, and July data could confirm or challenge these fears. Is the Spanish labor market headed for a cycle change, or will July restore the upward momentum companies have shown in previous months?
Employment slowed in June, adding 54,000 jobs—the weakest June since 2015
Spain added 54,000 jobs in June compared with May. The slower pace was partly driven by weaker performance in hospitality, agriculture, and construction, contributing to the softest growth since 2015. Still, the overall trend remained positive, aided by inertia that kept the total active workforce high, reaching 20.8 million workers—an unprecedented milestone in Spain.
The expansion phase since the pandemic’s trough has progressed, but each step has required more effort. In June 2022, job creation was double what was seen this year, and 2021’s gains were four times larger. The June figure also trails the five-year pre-pandemic average.
Seasonally adjusted figures, which strip out typical cyclical distortions, suggest a weaker result for June. Estimates show a drop in employment and a notable weakness in construction and accommodation services. It marks the first negative monthly change in a year when looking at the seasonally adjusted data.
Historically, the second half of the year tends to be softer than the first. In the first half of 2022, employment reached 523,418, while the second half absorbed a further loss of 52,058 workers.
Unemployment evolution
Unemployment fell again in June, with 50,268 fewer people out of work, bringing the total to 2.68 million. It remains the lowest unemployment level in 15 years, yet it ranks among the highest in the European Union. The pace of decline has slowed, as the pre-pandemic period saw sharper drops in unemployment. The average drop from 2014 to 2019 was about 103,494 people per year.
Looking ahead, the path of unemployment in the second half will depend on multiple factors. Historical patterns show weaker outcomes in the second half, but the exact trajectory varies. In 2019, unemployment rose in the second half by roughly 148,000 people after a strong first half, while in 2022 the second half saw declines. Hiring momentum will be central to the future trend. Stability in performance helps reduce volatility—temporary reliefs in confidence can dampen job losses during crises and temper gains during expansions.
Discontinuous contracts, when workers exit the labor force, are neither counted as employed nor unemployed and may influence future statistics. In the second half, a shift in affiliate numbers might complicate the unemployment picture without necessarily signaling a broader labor market deterioration.
Expectations around unemployment also shape behavior. A brighter economic outlook and higher chances of finding work can prompt people to pause search activity, affecting unemployment statistics. Conversely, pessimistic signals can lead more workers to enroll, pushing the numbers higher even if job prospects are not worse.
Self-employed trends
The self-employed group showed little net change in the first half of the year. Start-of-year losses were followed by tentative gains as affiliates adapted to a new contribution framework. Change aversion and uncertainty may have slowed sign-ups among some of the most dispersed workers. The overall environment could prompt the opening of new ventures as people explore alternative earnings.
Trade, along with agriculture and manufacturing, faced notable declines in self-employment. The sector noted a drop in thousands of self-employed workers amidst broader economic pressures.
Quality of jobs and what it means
Whether job creation runs hot or cool, the quality of new contracts remained a focal point. A notable share of new hires were on more stable contracts, reflecting a strengthening in job security. Temporary employment stayed on a lower trajectory, helped by reforms aimed at creating more stable employment. Fewer people signed up for temporary work compared with pre-reform levels, and that trend has subdued the overall volatility in hiring.
Demographics helped shape the pattern; younger workers benefited from a reduction in short-term arrangements, implying a healthier composition of the workforce as a whole. The shift away from temporary contracts contributes to a more durable labor market, with less sensitivity to short-term shocks.
Regional disparities
Second-half performance often hinges on regional dynamics, with tourism-reliant areas typically affected more by seasonal shifts. Catalonia has emerged as a leading regional driver, surpassing Madrid in June by job creation. Catalonia contributed significantly more employment to the national total, underscoring its role as a growth engine. Madrid faced a tougher start to the year, though its labor market began to stabilize as 2023 progressed, reflecting the broader national trend of gradual improvement.
In the first half of 2023, Catalonia added a substantial number of Social Security participants, while Madrid recorded a smaller increase, highlighting the uneven regional momentum that will influence the second half of the year.