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Spain's unemployment rate rose to 26 percent in the fourth quarter of 2012, or 5.97 million people, the National Statistics Institute said on Thursday, up from 25 percent in the previous quarter and more than double the European Union average.

"We haven't seen the bottom yet and employment will continue falling in the first quarter," said Citigroup strategist Jose Luis Martinez.

Spain sank into its second recession since 2009 at the end of 2011 after a burst housing bubble left millions of low-skilled laborers out of work and sliding private and business sentiment gutted consumer spending and imports.

Efforts by Prime Minister Mariano Rajoy's government to control one of the euro zone's largest deficits through billions of euros of spending cuts and tax hikes have fueled general malaise, further hampering demand.

When Rajoy took office in late 2011 there were 5.27 million jobless in Spain.

The economic downturn put an average of 1,900 out of work every day through 2012 and with the recession expected to last at least until the end of 2013, net job creation is unlikely this year.

Joblessness has been particularly acute for Spain's youth, with 60 percent of people under the age of 25 unemployed in the fourth quarter.

In the fourth quarter, the economy shrank at its fastest pace since the recession began, the Bank of Spain said on Wednesday, dragged down by a steep drop in private consumption due in part to a September VAT hike and public wage cuts.

(Additional reporting by Manuel Maria Ruiz; Writing by Paul Day; Editing by Fiona Ortiz)