When the Spanish real estate bubble burst back around 2008/9 it officially threw almost 600,000 construction workers onto the street, but the latest figures show sector unemployment levels are almost back to where they were before the bust started, despite starting 90% fewer homes. How does that work?
The chart above, prepared by the Spanish portal idealista, illustrates Spain’s monumental real estate crash from the angle of jobs destroyed by the construction sector.
According to Spain’s Employment Bureau (SEPE), official unemployment numbers in the sector, which I think includes everything from brickies to architects, exploded from around 200,000 in 2007 to around 800,000 in the years 2009 to early 2013, then started to decline gradually from around March 2013 reaching a post-crisis low of 250,000 in May this year. That’s still a lot of unemployed people by the standards of most countries, but not Spain.
In the crisis years I knew of architects working as nannies and waitresses, those who could went abroad in search of work, and hundreds of thousands of immigrants from North Africa and Latin America who were drawn to Spain by the construction boom to work as brickies, went back home, and perhaps didn’t show up on the unemployment numbers.
The fact that registered unemployment in the construction sector has almost returned to its pre-crisis levels is a good sign that reflects the gradual recovery of new home building since 2014.
However, when you compare the number of housing starts today to the number in 2007, the home building sector is still just 11% of what is was (2018/2006). In other words Spain started building last year almost 90% fewer homes that in 2006, yet the number of unemployed people in the construction sector is down to close to what it was in 2006. This gives you an idea how big the black economy was back in the boom years. Hundreds of thousands of brickies were paid in cash and never showed up in the employment figures. No doubt it still happens, but I imagine on a much smaller scale. Which would explain why official unemployment is back to where it was despite building 90% fewer homes.