The number of people registered as unemployed at the country’s employment offices climbed by more than 79,000 in September due to the end of the tourist season and the drastic cuts in public spending, particularly in the health and education sectors. The number of workers signed up with the Social Security system also continued to fall, with a further 86,000 dropping out in the month. In short, the situation in the labor market is clearly deteriorating, throwing into question the macroeconomic forecasts of the government for this year and the next.

The costs of unemployment condition the government’s social policies as a whole and are leading economic policy up a dead-end street. As was to be expected, the labor reform will only create jobs when activity recovers, and the budget situation for this year and the next appears incapable of holding to the stability commitments agreed with Europe.

The government’s economic team is denying what is obvious. The administration is using a macroeconomic framework that lacks coherence, and, on the basis of this, allows itself the luxury of arguing that unemployment may be close to bottoming out and that 2013 will be the last year of recession. These are assertions that are very difficult to substantiate.

On the contrary, on the basis of developments in the first two quarters, the jobless rate in the third quarter of this year could turn out to have gone above 25 percent to just under 25.5 percent. Since there is nothing on the economic horizon to suggest a correction in the downturn in activity — both consumption and investment remain in a worrying slump — and with no guarantees of a recovery in lending in the short term, the most likely scenario is that unemployment will rise above 26 percent in 2013. This is not the environment for a recovery.

The government seems unable to come to terms with the overwhelming problem of unemployment, locked as it is in resolving the dilemma of whether to ask for a European bailout. Meanwhile, it is feeding people with a highly confused and biased diet of information.

Policy dilemmas

The most striking example of this incongruence is precisely the official scenario for employment. The Economy and Finance ministries insist that employment will contract on average 0.2 percent next year and that the jobless rate will fall on average by 0.3 points from 24.6 percent in 2012 to 24.3 percent. Taking productivity into account, developments of this nature in the labor market would suggest economic growth of around 1.3 percent. At least.

But since the government itself is forecasting a contraction in activity for next year of close to 0.5 percent, you have to come to the conclusion that one of these variables — either the employment or the growth forecast — is incorrect. One of the two.

The complexity of this crisis lies in the fact that it consists of the concurrence of a number of imbalances that require contradictory solutions. Ensuring the stability of public finances was the priority, but since the government has not been able to guarantee this over the past nine months, and today still continues to vacillate over the rescue offered by the ECB, the consequences of the recession are undermining control of the deficit and debt.