The hole in Spain’s economy is getting deeper.
The government reported on Friday that unemployment rose to 24.4 percent in the first quarter — compared with 22.9 percent in the fourth quarter — and that more than half of Spaniards under 25 are now without jobs.
The bleak employment data came one day after ratings agency Standard & Poor’s downgraded the country’s debt.
The Spanish economy is in recession for the second time in three years as the damage from a housing bust persists.
Foreclosures are rising, Spain’s banks are in worse financial shape and the government’s deficit is hitting worrisome levels.
The first-quarter employment data showed that 365,900 people lost their jobs, bringing the number of unemployed Spaniards to 5.6 million. The unemployment rate for people under 25 climbed to 52 percent, up from 48.5 percent in the previous quarter.
“The figures are terrible for everyone and terrible for the government,” Spanish Minister of Foreign Affairs and Cooperation Jose Manuel Garcia-Margallo told Spanish National Radio. “Spain is in a crisis of enormous magnitude.”
The total number of unemployed increased by 729,400 compared with the first quarter of last year. The National Statistics Institute said on Friday that Spain now has 1.7 million households in which no one has work.
The figures were another blow to the conservative government of Prime Minister Mariano Rajoy after Standard & Poor’s late on Thursday became the first of the three leading credit rating agencies to strip Spain of an “A” rating.
It cited a worsening budget deficit, worries over the banking system, and poor economic prospects for its decision to reduce the rating by two notches from “A” to “BBB+.”
S&P even warned that a further downgrade is possible as it left its outlook assessment on Spain at “negative.”
Spain, the eurozone’s fourth-largest economy, is just now just three notches above so-called junk status.
Earlier this week, the Bank of Spain confirmed that the country had entered a technical recession — two consecutive quarters of negative growth.
The country’s economic problems have become the center of Europe’s debt crisis in recent weeks as investors worry over Spain’s ability to push through austerity measures and reforms at a time of recession and mass unemployment.
The cuts are aimed principally at slashing the government’s deficit from 8.5 percent of economic output to the maximum level set by the EU of 3 percent by next year. For this year the goal is 5.3 percent.
With the economy shrinking and the population restless, there are concerns that the government will not meet its targets and will be forced to seek a financial rescue as Greece, Ireland and Portugal have done before.
The difference is that Spain’s economy is double the size of the combined economies of the three countries that have already been bailed out. The other eurozone countries would struggle to muster enough money to rescue it.
Despite the dismal job numbers, the government predicted a roughly balanced budget in 2016.
Foreseeing the economic downturn, businesses have been laying people off at a faster rate than expected, said IESE Business School economics professor Antonio Argandona. New laws also make it easier for companies to shed workers at low cost.
Argandona said Spain is not now at risk of needing a bailout because its government is still solvent. However, even if the economy returns to growth next year as forecast, the jobless rate will lag behind and unemployment could hit 26 percent, he added.