Spain's jobless rate broke the 25-per cent barrier for the first time in modern history as austerity cuts squeezed the recession-struck economy, the government said Friday.

Tens of thousands of jobs were destroyed in the third quarter as Prime Minister Mariano Rajoy's government raised taxes, cut spending and pondered whether to seize a eurozone rescue line.

The unemployment rate rose to 25.02 per cent in the third quarter -- the highest since General Francisco Franco's death in 1975 -- from 24.63 per cent in the previous three months, official data showed.

Among workers aged 16-24 the jobless rate towered at 52.34 per cent in the third quarter, only slightly down from 53.27 per cent in the previous quarter, the National Statistic Institute said.

"They are very negative figures," said Soledad Pellon Bannatyne, market strategist at brokerage IG Markets.

"We are talking about the highest unemployment rate in the history of Spain. It's beating new records and that is perhaps the worst part of what this crisis is leaving us."

Pellon predicted no improvement for next year, either.

She said the economy needed to grow by more than 1.5 per cent in order to generate new jobs but even the government's optimistic forecast was for a economic contraction of 0.5 per cent in 2013.

"With that 0.5-per cent fall there won't be a single job created. More than that, with that 0.5-per cent fall we will carry on destroying jobs," the economist said.

After more than a year of recession, the soaring jobless figures and biting cuts have prompted growing street protests and unions have called a general strike for November 14.

The jobs figures, the latest chapter in a long, grim economic story for Spain, had only a short impact on the stock exchange, with the IBEX-35 index recovering most of its losses following strong US growth figures to close 0.05 points lower at 7,775.6 points.

A total of 5.78 million people searched in vain for work in the July-September quarter, up 85,000 from the previous three months, the official data showed.

The number of Spanish households in which every member is out of work climbed to 1.74 million -- or one in ten of Spanish homes.

The jobless rate was "eye-catching" but the biggest concern was the cumulative fall in employment over the past 17 quarters, said Raj Badiani, London-based economist at analytical group IHS.

Spain's jobs drama is being fed by a recession that is now moving into a second year, according to the Bank of Spain.

The economy has been shrinking since mid-2011 and is expected to decline again in the third quarter of 2012 at a rate of 0.4 per cent, the same as in the previous three months, the central bank said this week.

But "to the person on the street, the destruction of several million jobs since late-2007 coupled with an unemployment rate at 25.0 per cent are a more relevant guide to the depth of recession, and even suggest that Spain is being engulfed by near-depressionary conditions," Badiani said.

Employment will sink further in 2013 as austerity cuts chip away at public sector jobs and as private firms are hit by slumping demand, he said. At the same time, the property market had yet to hit bottom.

Spain, the fourth-largest economy in the 17-nation single currency area, has launched a vast programme including spending cuts and tax rises to save 150 billion euros ($US194 billion) between 2012 and 2014, prompting mass street protests.

After missing last year's deficit-cutting target by a large margin, Spain promised to lower the overall public deficit to 6.3 per cent of economic output this year and to 4.5 per cent of output next year.

Deputy Prime Minister Soraya Saenz de Santamaria said the latest job losses were mostly in the public sector.

"The public and regional administrations are making a big effort to contain the public deficit," she told a weekly news conference.

"We have to continue adopting basic structural reforms that allow the jobs to be created and make us competitive."

AFP