Why does Brussels expect less immigration and fewer jobs, but also less unemployment?

BrusselsThe Catalan economy continues growing at a good pace - above the Spanish average and even more so than the European average - and is expected to remain at this level for the coming months. However, Brussels predicts that economic activity across the country as a whole will gradually cool and points to a reduction in the pace of job creation over the coming months. However, seemingly contradictory, it also indicates that the unemployment rate will continue to fall. Why? Technical sources from the European Commission itself explain that this is due to the decrease in the arrival of immigrants starting next year and a general slowdown in the growth of the working population.

Thus, Brussels expects the labor market to remain "robust" and that "jobs will continue to be created," while, at the same time, the increase in the number of people of working age will "moderate," largely due to the lower incorporation of new arrivals, which, in turn, will cause a drop in the unemployment rate. According to EU executive calculations, the average unemployment rate in Spain this year will be 10.4%, and in 2026 it will be 9.9%, while last year it was 11.4%.

European Commission sources attribute this reduction in the unemployment rate primarily to the Spanish government's labor inclusion reforms, as well as those conditioned by Next Generation, the EU's post-COVID recovery funds. However, they point out that it is primarily due to a slowdown in economic activity; Idescat estimates the increase in Catalonia's gross domestic product (GDP) at 2.6% this year and 2% next year, when in recent years it has been clearly above 3%.

In this regard, Joan Llull, professor of economics at the Institute for Economic Analysis (IAE-CSIC) and the Barcelona School of Economics (BSE), explains in a conversation with ARA that economic growth and the arrival of immigrants are two "bidirectional factors that usually go hand in hand." That is, even if the unemployment rate falls, it does not necessarily mean that the real chances of the unemployed finding work increase.

However, Llull points out that the increase in the working population could lead to a statistical drop in the unemployment rate. Although the same number of unemployed Catalans may continue to exist, as the unemployment rate among immigrants is higher than among Catalans, the lower proportion of immigrants would lower the total unemployment rate.

In fact, the European Commission warned, in its autumn economic forecast report, that there is a "pool of unemployed people" in the Spanish state that remains stable and is difficult to reduce. Furthermore, it also warns that Spain is the country with the highest unemployment rate in the entire EU. In any case, Llull affirms that an increase in the number of people paying contributions is positive for the public coffers.

For this reason, all administrations, from the European Commission to the Generalitat (Catalan government), have proposed promoting measures to reindustrialize the continent and increase the creation of skilled jobs, which they believe could reduce this unemployment pool. Along these lines, Raúl Ramos, professor of economics at the University of Barcelona, stated in a conversation with this newspaper that there is an "important debate on changing the production model," although this "cannot be changed in four days." He also points out that, for example, the service sector, such as hospitality and tourism in general, can also have "great added value and still has a lot of potential."

The unpredictability of the immigration factor

The experts consulted explain that the factors influencing the number of immigrants arriving in Catalonia are varied and difficult to predict. Thus, they point out that the political and economic situation of the countries of origin, something that is difficult to predict, is key, as is the destination options for migrants forced to leave their homes. In this sense, if economic growth and job creation in Catalonia slow down and match the pace of the eurozone, newcomers may find it more attractive, or just as attractive, to go to work in other parts of Europe, although most countries currently register lower growth than Spain. For example, if German industry were to recover, it could receive some of the foreign labor force now settling in Spain.

Another factor is the housing crisis. The European Commission warns that, beyond the social consequences, the shortage of houses and apartments could become an economic problem, even limiting the growth of the state's GDP. In this regard, Brussels believes it could lead to an increase in labor shortages, especially in sectors such as services and care, where demand is expected to increase due to the aging of the population.