France: Labour Market Shows Continued Deterioration

The French labour market continues to deteriorate in lock-step with the economy. Employment declined 0.3% in Q4 2012, the same as real GDP.

The question now is not whether, but when and by how much the record number of French jobseekers, set in 1997, will be beaten.

The government has launched various measures to slow the rise in the unemployment rate. However, the trend is unlikely to change before the end of the year, in our view.

In France, as in most Eurozone countries with the exception of Germany, the labour market shows continued deterioration. The rapid rise in the number of so-called ‘category A’ jobseekers (those who have not worked in the past month) since mid-2011 is the most troubling. The slope is almost as steep as that of the deep recession of 2008-09. Between May 2011 and January 2013 (the latest figures available), some 460,000 new claimants joined the French dole queue. At the last count, the total number of jobseekers was 3.169 million. The question now is not whether, but when the record high of 3.196 million set in January 1997, will be beaten.

The rise in the unemployment rate since the spring of 2011 may seem less severe, but it is still significant and in line with economic activity contraction (see Figure 1). The unemployment rate rose from 9.5% in the second quarter of 2011 to 10.6% in the fourth quarter of 2012. Eurostat estimated the rate at 10.6% in January 2013. The previous peak of 11.2%, again set in 1997, is only half a point away. Our forecasts suggest that this level is almost certain to be reached by the end of 2013, and the risk is high that it will be exceeded.

Stable at 10.2% in the third quarter of 2012, the unemployment rate rose significantly in the fourth quarter (by 0.4 point). It was pushed up by a strong rise (1.6 points to 25.7%) in unemployment among those aged 15 to 24. While the devastating effects on youth employment can be seen every time the economy goes through tough times, this time around it is not just the young who have been hit. The 2010 pension reform has had an effect, as has the increase in the legal retirement age: employment rates and participation rates for those aged over 49 have both gone up (pulled up by those aged over 55s), but so has the number of over 49s out of a job (jobless rate up 0.4 of a point to 7.2% in Q4). The unusually strong increase in the labour force (up 1.3% over the quarter, compared with an historical average quarterly increase of 0.2%) softens the blow slightly.

France’s unemployment rate has always been very close to the eurozone average. However, since mid-2011, a gap has opened up, under pressure from the dramatic increases in unemployment in Spain and Italy and despite the fall in Germany. In January 2013, the Eurozone unemployment rate reached 11.9%, the Spanish rate inched up to 26.2% and the Italian rate climbed to 11.7%.

B YHélène BAUDCHON

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