The government marked the unemployment milestone as a central achievement of its economic agenda. Photo credit: Tasataur/Shutterstock
Spain ended 2025 with an unemployment rate below 10% for the first time since 2008, marking a major milestone in the country’s fight against long-term high unemployment. According to the latest statistics from the National Institute of Employment Research (INE), or National Institute for Employment Research, the unemployment rate in the final quarter of 2025 was 9.93%, down significantly from 10.45% three months earlier and the lowest level in about 18 years.
The reductions reflect strong job creation and continued economic momentum over the past year, with more than 605,400 new jobs added across the Spanish economy. The total number of employed people reached a record high of approximately 22.46 million by the end of the year, while the total number of unemployed people decreased to approximately 2.47 million.
Economists and policymakers hailed the numbers as evidence that structural reforms and private sector expansion are paying off. Many of the new jobs will be in the private sector, accounting for approximately 92% of employment growth in 2025, reflecting broader labor demand.
Drivers of employment growth
Several factors contributed to the strength of Spain’s labor market in 2025. Growth in the services, manufacturing and construction sectors led to employment growth throughout the year, with a notable increase in full-time and indefinite-term contracts. Government officials pointed to strong consumer demand, investment in green and digital industries, and increased tourism activity as the main factors behind the employment increase.
Economy Minister Carlos Cuerpo described the data as evidence of a “stronger and more stable job market with better quality jobs,” highlighting the increased share of full-time and permanent employment compared to temporary employment. The evolution of contracts, particularly the increase in permanent positions, was seen as an indication of an increase in the quality of work rather than simply the quantity of work.
Private sector dynamism was central to this trend. Small and medium-sized enterprises in particular expanded their workforces to meet growing demand, and multinational companies continued to expand their operations in Spain’s key regions. Following a strong summer season, tourism and hospitality industries also contributed to the increase in the workforce.
Regional and demographic patterns
Improvements in the labor market were reflected in large parts of Spain, although there were notable regional differences. Some autonomous communities recorded steeper declines in unemployment rates than others. For example, although unemployment rates have decreased significantly in certain regions, labor market conditions remain uneven and economic activity remains more limited in rural areas.
The youth unemployment rate is also on the decline, although it remains significantly higher than the national average. The unemployment rate for workers under 25 has hovered around 23%, the lowest level since the global financial crisis, but remains a key challenge for policymakers seeking to improve labor market inclusion for young people.
broader economic context
The decline in the unemployment rate occurred amid steady economic growth. Spain’s gross domestic product expanded at a steady pace throughout 2025, supported by domestic consumption, investment and exports. This economic backdrop helped sustain labor demand and offset pressures from global inflation risks and geopolitical uncertainty.
Despite the encouraging numbers, analysts warn that long-term structural challenges still exist. Skills mismatches, regional disparities, and the need to improve productivity continue to be policy challenges. Affordable housing continues to limit labor mobility for many workers, especially in large urban areas.
Another factor influencing employment trends is migration. Spain’s relatively open labor market and demographics have led to increased participation of foreign-born workers, which helps meet labor demand in certain sectors. However, integration and fair access to quality jobs for all residents remain priorities for labor market reform.
Political and policy reactions
The government marked the unemployment milestone as a central achievement of its economic agenda. Prime Minister Pedro Sánchez said the data shows the effectiveness of job creation policies and labor market reforms implemented in recent years. He emphasized the combination of public initiatives and private investment as a key element in sustaining job growth.
Opposition parties acknowledged improvements but stressed the need to address persistent challenges, including high youth unemployment and precarious working conditions, which still affect some sectors. They called for targeted strategies to enhance training, lifelong learning opportunities and better align education with labor market needs.
Outlook for 2026
Looking ahead, economists expect Spain’s labor market could continue to strengthen in 2026 if investment and demand remain resilient. Although wage growth is modest, it is expected to contribute to an increase in personal consumption, which could support further job creation. However, external risks such as a slowing global economy and supply chain disruptions could dampen optimism.
Experts agree that keeping unemployment below 10% requires concerted efforts to improve the quality of jobs, address regional imbalances and support vulnerable populations. A continued focus on innovation, digital transformation and sustainable economic sectors will be key in shaping Spain’s future labor market trajectory.
