Spanish unemployment surged to a record 24.4% at the end of March.
A total 5.64 million people searched in vain for work in the economy, the National Statistic Institute said.
European markets dropped sharply before steadying this morning upon news that Standard & Poor's had downgraded Spain's credit rating by two notches.
Already, Spain had the highest unemployment ratio in the industrialized world, as the slumping economy failed to absorb the millions of workers cast out of jobs when a property bubble imploded in 2008.
In a climate of recession, compounded by a renewed zeal for austerity to rein in the deficit and curb mushrooming debt, the jobs market deteriorated dramatically.
The unemployment rate soared to 24.44% of the potential workforce at the end of March from 22.85% three months earlier, the National Statistics Insitute report showed.
Some 365,900 jobs were destroyed in the first quarter of the year, pushing the unemployment rate to its highest level since records began in their existing format in 1996, it said.
Standard & Poor's cut its credit rating on Spain by two notches to BBB+ on Thursday and put it on negative outlook, citing expectations that government finances will deteriorate even more than previously thought as a result of a contracting economy and an ailing banking sector.
The rating agency also said the situation could deteriorate further unless strong measures were taken at a European level.
Investors are also bracing themselves for an Italian debt auction today. The country is set to offer up to 6.25 billion euros in bonds, with borrowing costs expected to climb above 5.5% for the benchmark 10-year bond. It yielded 5.8% on Thursday, up from an auction level of 5.2% at the March sale.
