- The third-quarter labour survey recorded some 570,000 more people in work than in the previous quarter.
- Even so, unemployment rose by 355,000 people to 16.26%, the highest rate since the first quarter of 2018.
- Furloughed workers still count as employed: the figure reflects people returning to job-hunting, not just real activity.
On 27 October 2020 the National Statistics Institute (INE) published the labour force survey for the third quarter. Between July and September the number of people in work rose by some 570,000, or 3.06%, but unemployment also grew: 355,000 more people, to 3,722,900, with a rate of 16.26%, 0.93 points higher than in the previous quarter and the highest since the first quarter of 2018.
At first sight, more employment and more unemployment at the same time seems a contradiction, but it has a well-known statistical explanation. It is the counterpart of what happened in spring, when many people without work could not look for it. Understanding this swing helps avoid hasty conclusions from a single quarter, in either direction, and to plan with a fuller view of what is happening in the labour market.
Why both figures rise
The survey counts as unemployed anyone who has no job and is actively looking for one. With the end of lockdown and the reopening of activity, many people who had dropped out of the labour market started looking for work again, and so the labour force grew. If not all of them find a job straight away, unemployment rises even as employment also rises. It is a common phenomenon when coming out of a crisis and should not, on its own, be read as a worsening of the situation.
The third quarter also adds the seasonal effect of summer, which improves employment in tourism and hospitality, and the return to normal activity of many workers who had been on furlough. According to CaixaBank Research’s analysis, those in work without being on furlough rose 12.1% on the previous quarter, although they remained 6.9% below a year earlier.
What the survey does not distinguish
The survey treats workers on a job-suspension furlough as employed, so the employment figure does not distinguish between someone working normally and someone on hold with public support. That is why it is worth looking at hours worked, social security enrolment and the number of workers on furlough at the same time.
At the end of September it was agreed to extend furlough schemes until 31 January 2021, a sign that the productive fabric still needed that support. How the last quarter of the year develops, with new restrictions under way in Spain and Europe, would determine whether the summer improvement consolidated or was interrupted, and it will also affect how the next survey’s figures are read. For that reason the figures of the coming months will be read with particular caution.
What to review
For a company, aggregate data should be read alongside its own: productivity, real staff utilisation, absenteeism and labour cost. It is worth reviewing the situation of furloughed workers before the new expiry date and assessing which activity can be recovered and which cannot, so as to decide in good time rather than react when the deadline arrives. A timetable of staffing decisions, with dates and owners, avoids improvising in December.
For families, still-high unemployment suggests caution about long-term spending commitments and a review of insurance cover and available liquidity. This note is informative and does not replace the assessment of an employment or financial adviser, who can analyse your specific case with the complete data.
Employment recovers when people start looking for it again, but that shows up in unemployment first.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
