MADRID — Spain kicked off 2016 with good news on the work front as the labour ministry announced a sharp drop in unemployment last year, even if one in five people remain jobless.
But analysts warned that the news risked being overshadowed by the current political paralysis gripping Spain as Prime Minister Mariano Rajoy struggles to form a government following inconclusive December elections that saw his Popular Party (PP) lose its absolute majority.
The labour ministry said the number of unemployed dropped nearly eight per cent last year from 2014 to 4.04 million, the largest annual decline since 1996.
"The trend is very good," Rajoy told Cope radio.
"What we need to do now is to persevere," he added, reiterating his promise to create two million more jobs over the next four years if he manages to hold onto his post.
In December alone, the number of jobless fell by 55,790, mostly thanks to temporary services jobs created during the festive season.
'Very good' trend
But according to the most recent figures released by national statistics office Ine, the unemployment rate still stood at 21.18 percent in the third quarter -- the second worst performance in the eurozone after Greece.
Spain was hit hard by the global financial crisis, experiencing five difficult years of on-off recession that saw unemployment rocket from a low of around eight percent in 2007 to a high of 27 percent in 2013.
The current trend "is very good", said Carlos Martinez, an economist at Madrid's IE Business School.
"The majority of these jobs are temporary with low salaries, but let's not forget that just a while back, we were losing more than half-a-million jobs a year."
The services sector -- which carries a lot of weight in the Spanish economy -- was one of the most dynamic last year, with a 3.3 percent rise in jobs to 13 million.
This is linked to "the increase in domestic demand (with) the rise in household consumption... and tourism," said Miguel Cardoso, chief Spain economist at the BBVA bank.
This rise in domestic demand from households and companies is helping Spain's economic recovery, as is the drop in oil prices and low interest rates.
GDP growth is expected to hit 3.2 percent in 2015 compared to just 1.4 per cent in 2014, according to Madrid's latest forecasts.
And the country's construction sector, a major engine for growth that stopped in its tracks after the housing bubble burst in 2008, has come back to life.
At the end of December, it employed some one million people.
But the PP's apparent success in reviving Spain's economy failed to convince voters last month as many pointed to the drastic spending cuts and tax rises that came with it.
Rajoy now wants to form a coalition with the PP's traditional Socialist (PSOE) rivals who came second in the elections, as well as upstart centrist party Ciudadanos which arrived fourth.
But the PSOE has so far refused any form of alliance, and on Tuesday criticised the PP's track record.
"Precarity and inequality are the hallmarks of the PP's model of economic recovery," it said on its official Twitter account, saying that 92 percent of all work contracts in 2015 had been temporary.
Anti-austerity party Podemos, which came third in December elections, and Ciudadanos also criticise Rajoy's economic and social results.
Economist Carlos Martinez said the current political paralysis in Spain represented "a significant risk because we don't know what will happen on a national level or in Catalonia."
The wealthy, semi-autonomous Spanish region has been riven by a separatist movement, but there too the secessionist faction that won September parliamentary polls has failed to agree on a new government.
On both fronts, fresh elections could be called. — AFP