The financial crisis taught us two lessons. First, things won't be like they were before. Second, without new jobs or credit, there won't be a recovery. The first realization seems clear enough, and the second will be obvious soon enough. There are some small signs that the banks are starting to lend money and the Survey of the Active Population from Q2 suggests that the economy is entering a new phase.
The first thing that the Survey shows is that unemployment has dropped by 424,500 year-to-year, which is the biggest drop of the century. But there is more. The unemployment rates fell from the psychological barrier of 25%, and the number of new jobs increased more than it has in six years. Also, for the first time in a while the size of the active working population increased, and even construction and manufacturing jobs are growing. This explosion of good news gives the government some bragging rights and the motivation to enact tax reforms that should be approved today. Prime Minister Rajoy said yesterday, "I have been waiting to give this news about jobs since I got to Moncloa." He was waiting, and so were five million unemployed workers in Spain, over a million who had been out of a job for years. Not wanting to subtract from the positive data, we should not forget that unemployment will still be a problem for economic growth and that the basis for real growth is not as solid as it needs to be, because the government still needs to make some cutbacks.
Ultimately, labor reforms need to be tightened by lowering social security contributions, which can incentive hiring and slash some existing contracts that are too expensive for companies. Because boosting part-time and poor-quality jobs only is not the path toward economic growth.
