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France’s unemployment rate has risen by more than expected in a blow to President Emmanuel Macron’s ambition to end the country’s chronically high jobless rate.
The number of unemployed people in France increased 64,000 to 2.3mn in the three months to September, its highest level for two years, with job losses disproportionately affecting younger workers and women.
The national statistics office data showed the country’s jobless rate rose from 7.2 per cent in the second quarter to 7.4 per cent in the third quarter. Economists polled by Reuters had forecast a smaller increase to 7.3 per cent.
Macron had pledged to get France to full employment — equivalent to a jobless rate of 5 per cent — by the end of his second term in 2027. He has already made progress. Since he took office, the unemployment rate has fallen sharply from above 10 per cent in 2016 to 7.1 per cent in the first quarter of this year, its lowest level in decades.
The government has reformed labour markets to make it easier to fire workers, trimmed unemployment benefits and promoted apprenticeships in a bid to reduce high rates of joblessness among younger and low-skilled workers.
But after the French economy slowed and recent reforms lost momentum, the jobless rate started rising again over 2023. It also remains above the average of 6.5 per cent for the 20 eurozone countries in September.
“The trend is not expected to improve in the coming quarters,” wrote Sylvain Bersinger at Asterès, an economic forecasting group. “The labour market, which had been very dynamic after the pandemic, deteriorated in the third quarter. All labour market indicators are in the red.”
The government is acutely aware that achieving full employment may prove difficult. The European economy has slowed as rising interest rates, high inflation and weaker global trade have hit output at businesses and eroded consumer demand. French output rose only 0.1 per cent between the second and third quarters.
A downturn in the wider eurozone economy, which shrank 0.1 per cent in the third quarter, has already produced signs of cracks in the region’s labour market. Unemployment in Germany rose in October by the most for more than a year. The eurozone’s jobless rate also inched up to 6.5 per cent in October, from a record low of 6.4 per cent in September.
The downturn in the labour market is also affecting the groups that have traditionally been most exposed to unemployment in France.
The jobless rate among younger French workers is on the rise, with the rate for those aged 15 to 24 climbing from 16.9 per cent in the second quarter to 17.6 per cent in the third quarter. The increase could reflect the government almost hitting its target of 1mn apprenticeships, more than double the number four years ago. The unemployment rate among women also rose from 7.1 per cent to 7.4 per cent.
Goldman Sachs economists wrote in a note to clients this week that reaching the government’s “ambitious” 5 per cent full employment target was “likely to require further reforms”.
Economists expect Macron’s government to consider incentives to employ older workers or cut jobless benefits for higher earners to regain momentum.
But getting further reforms through parliament, where Macron’s centrist alliance no longer has a majority, may be challenging. There is also the risk of public backlash. Street protests were triggered by Macron’s flagship pension reform, pushed through last spring.
That hard-fought policy change has also begun to add people to the unemployment rolls by gradually raising the retirement age from 62 to 64. Some economists estimate the change could eventually add about 0.3 percentage points a year to unemployment — a reflection of France’s poor record of keeping older people in the workforce.
Patrick Artus, an economist at Natixis bank, said France’s economy was still creating jobs, although productivity — hourly output per worker — was worsening. “It’s not really the weakness of the labour market that is driving unemployment higher, it is the combination of pension reform, an uptick in corporate bankruptcies, and weak productivity gains,” he said.
Even so, Artus said the government should focus more on improving the labour force participation rate, which stands at 68 per cent in France, about 10 percentage points lower than in Germany. “Macron’s goal to cut unemployment to 5 per cent is not ambitious enough, and it is not the right metric to aim at to ensure prosperity,” he said.
Source: Economy - ft.com
