Spain appears to be very close to making the transition between rising and falling unemployment, and in fact this vital pivot point may already have taken place although the positive seasonal factors caused by tourism at this time of year make it hard to be certain.

As we have argued several times before (most recently with regards to Ireland) the point at which employment gains start to make themselves felt is much more important than most observers realize, even when the prevailing rate of unemployment is higher than is generally acceptable (as is the case in both Spain and Ireland today). This is because it is at this point that the confidence of those left with a job starts to recover as their own personal risk of lay off recedes, and also because a drop of unemployment by definition means an increase of wage earners, with obvious implications for overall economic activity.

In terms of July's data Unemployment fell by -64.9K and although this was slightly less than consensus expectations of -75K the massive June drop (-127K) probably included some front loading of July employment. Even so this is the best July data since 2010 and allows the 12 month ma to fall to 9.28K, the lowest level since December 2007. We do believe that this metric will fall into negative territory (signaling a YoY gain in employment) later in 2013.

As for the number of unemployed this remains very elevated at 4698K, although this is down from the February 2013 peak of 5040K it is still 2.4% higher than the level of July 2012. On the other hand this rate of increase is itself the smallest since August 2007, again suggesting that we are very close to the point that Spain's economy becomes a reliable provider of new employment.