Spain's unemployment queues grew by 30,100 in the fourth quarter of 2014 but shrank by 477,900 over the course of the year, new figures released on Thursday show.
The total number of people out of work is 5,457,700, according to the figures from Spain's national statistics agency.
This put the country's official unemployment rate at 23.7 percent, just up from the 23.67 percent registered in the third quarter of 2014 and still one of the highest levels in the European Union.
The fall was greater than what had been expected by the government, which had forecast the country would end 2014 with a jobless rate of 24.2 percent as en economic recovery gains pace.
The Spanish economy, the eurozone'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 which brought Spain to the verge of default.
The statistics office said employment increased by 433,900 in 2014. By sector employment increased by 344,200 in services, 98,000 in industry and 40,000 in construction.
The government estimates the economy will have expanded by 1.4 percent in 2014 and will grow by 2.0 percent in 2015, a faster growth rate than is expected in France, Germany and Italy.
It sees Spain's unemployment rate easing to 22.2 percent at the end of 2015.
A total of 5.46 million people were unemployed in Spain at the end of 2014, according to the statistics office.
The jobless rate remains the highest in the European Union after Greece's, which stood at 25.8 percent at the end of October.
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.
Unions say the reforms unfairly favour employers and destroy hard-fought rights and have only helped create low wage jobs.
The International Labour Organization is more pessimistic than the government when it comes to job creation in Spain.
In its latest forecasts published on Tuesday it predicted Spain will have a jobless rate of 23.8 percent at the end of 2015. It sees the country's jobless rate remaining above 20 percent until the end of the decade.
Spanish bank BBVA forecasts it will take eight tp 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 percent in 2007.
Thursday's figures — different from the monthly figures provided by Spain's Labour Ministry — are based on a quarterly survey of 65,000 households across the country, or the EPA.
The EPA is considered the clearest picture of unemployment in the country as it also captures people who are looking for work, but are not registered at the country's employment offices.