The Bank of Spain agrees with the government?s prediction that hiring will ramp up this year and continue through 2015. By that time, they expect 400,000 new jobs for Spain and a 28.8% unemployment rate. This rate is still relatively high for the region, but symbolizes a positive inflection point for a nation that has experienced six straight years of job cuts.
More jobs will accompany a 1.2% boost in GDP in 2014 and a 1.7% jump in 2015, which again proves the theory that Spain will create more jobs with minimal growth. In this sense, Luis M. Linde outlined the effects that labor reforms will have on the job market, such as flat salaries. Even though the macroeconomic climate has improved and the banking sector has been cleaned up, the Bank of Spain thinks that the nation will have to proceed with caution through the first phase of recovery and that it will not be as powerful as people expect. He joins a chorus of EU bankers who warn about the risk of deflation. Japanization in the euro zone could be the most serious threat to recovery and a blow to sovereign debt in the region. Still, many analysts think that this threat will not become a reality for several reasons.
Foremost, there could be some pressure put on prices and an increase in demand. These factors will make up for the public sector enacting its measures ever so slowly.
