Spain's unemployment rate fell for the second year in a row in 2014 to 23.7% as an economic recovery gained pace, but the rate remains at one of the highest levels in the European Union. 

Spanish joblessness fell from 25.73% in 2013 as the country's large services sector took on more staff.

The hiring was driven by a strong tourist season while construction activity also picked up, the National Statistics Institute said. 

The fall was greater than what had been expected by Prime Minister Mariano Rajoy's government, which had forecast the country would end 2014 with a jobless rate of 24.2%. 

The Spanish economy, the euro zone's fourth-largest, has enjoyed modest but steady growth since emerging in mid-2013 from its second recession after the collapse of a property bubble in 2008.

This brought Spain to the verge of default and threw millions of people out of work. 

The number of people without jobs fell last year by 433,900. During last year, employment increased by 344,200 positions in the services sector, 98,000 in industry and 40,000 in construction. 

The government estimates the economy will have expanded by 1.4% in 2014 and will grow by 2% in 2015, a faster growth rate than is expected in France, Germany and Italy. 

Spain's Economy Minister Luis de Guindos has said the government's forecasts could be revised upwards. 

Rajoy, who is facing a general election at the end of the year, credits a 2012 labour law reform which has made it easier for employers to lay off workers or reduce their wages, thus reducing their risk in creating jobs.

But unions say the reforms unfairly favour employers and destroy hard-fought rights and have only helped create low wage and short-term jobs. 

A total of 5.46 million people were unemployed in Spain at the end of 2014, according to the statistics office. 

The country's jobless rate remains the highest in the European Union after Greece's, which stood at 25.8% at the end of October. 

Economists warn that the sky-high jobless rate is still a major drag on an economic turnaround in Spain, with many households struggling to make ends meet and youths failing to enter the workforce. 

The unemployment rate among those under the age of 25 stands at 51.8% while the number of Spanish households all family members in the workforce are out of work fell by 23,100 to 1.77 million in 2014. 

The government predicts Spain's unemployment rate will drop to 22.2% at the end of this year. But the International Labour Organisation is more pessimistic.

In its latest forecasts published this week it predicted Spain will have a jobless rate of 23.8% at the end of 2015. It sees the country's jobless rate remaining above 20% until the end of the decade. 

Spain's second-largest bank BBVA forecasts it will take 8-10 years for Spain's jobless rate to return to the levels close to those that existed before the property bubble collapsed. 

Spain's unemployment rate stood at 8.57% in 2007, its lowest annual level since the country returned to democracy following the death of dictator Francisco Franco in 1975.