Good and bad news from the French labor market. At economic levels, employment remains resilient in the face of a slowed-down France on the verge of recession, while at a political level, it further distances Macron from the dreamed “full employment” that he promised at the end of his mandate in 2027. If he does not achieve it , would be one more notch in his economic management in a context in which Le Pen’s extreme right is in full swing.
The increase in unemployment throughout last year already predicted that the dreams of the president of the achieving an unemployment rate of 5% (full employment) in 2027 is almost impossible. In the fourth quarter of 2023, the unemployment rate in the French country stood at 7.5%, compared to 7.1% the previous month, as published this Tuesday by the National Institute of Statistics and Economic Studies (INSEE). in French).
The four-tenth increase in the unemployment rate at the end of last year, in purely economic terms, could be considered “good” data. France is going through, like the rest of Europe, a period of economic slowdown with completely stagnant growth. and close to recession: grew by 0.9% in 2023. The consensus of Bloomberg It also gives it 0.9% for 2024, while other international organizations (OECD and IMF) set a reduced forecast in the 1% range. A “slight” recovery is expected by 2025, with growth close to 1.5%. Therefore, employment remained static and resilient to the economic situation.
The economists of Bloomberg Eleonora Mavoreidi and Maeva Cousin assure that the much criticized pension reform “boosted labor supply and reductions in employers’ social contributions reduced labor costs.” But they warn that it is a similar trend in the rest of the Old Continent, which is why they assure that Macron “was lucky.”
In the breakdown of the figures there are two pieces of information that are key: long-term unemployment and youth unemployment. The first increased slightly, one tenth compared to the previous quarter, reaching 1.9% of the active population. It is true that it is still slightly lower compared to the same period in 2022 (-0.1 points) and much lower than that registered at the end of 2019 (0.4 points).
For its part, the youth employment rate remained stable (35.3%) in the last three months of 2023 and almost stable during the year, growing only 0.1%. That is to say, youth employment is not moving.
What worries Macron now is that this kind of “luck” will end and big companies will begin to cut jobs before the elections to the European Parliament in June. This would further support the recent rise of the extreme right, fueled precisely by making reforms that made the labor market even more flexible and raising the retirement age. All under the promise that this would solve the country’s long-term economic decline.
The far-right Rassamblement National (RN), heirs of Le Pen’s Front National, under the presidency of the young Jordan Bardella, made a lot of money from the revolts that caused these flexibility measures and raised them in popularity.
Macron has pressed the “reset” button on his presidency for the European elections with the appointment of Gabriel Attal as prime minister after the bad image that was created its Executive under the command of Élisabeth Borne, who was in charge of announcing these reforms. According to voting intention surveys, his party is 10 percentage points away from Bardella’s far-right. From RN they assure that this means a “springboard” for Le Pen to enter the Elysée in 2027.
The first litmus test for Attal was the revolts in the French countryside, which paralyzed the country for several days. While Le Pen and his people tried, once again, get political benefit from this, Attal toughened the speech to the point of criticizing Spanish agricultural products for “unfair competition” with the French. With this, the only thing he wanted was to win over the French camp and stop them from fooling around with the extreme right.
The business climate works against you
Companies have placed the challenge of the labor market in France as a priority on the agenda. Last week, Société Générale bank announced a plan to cut 900 jobs at its headquarters and digital payments provider Mundoine says it will cut its workforce by 8%.
Construction is also having a hard time due to the rise in interest rates by the ECB. In this sense, the executive director of Vinci (one of the largest construction companies in the country), Xavier Huillard, assured last month that voluntary dismissals had been discussed with the representatives of its workers.
In this sense, the president of the French Federation of Real Estate Developers, FPI, estimated that the drop in new construction projects will result in 300,000 fewer jobs. Furthermore, although rates go down, the general delegate of the federation, Didier Bellier-Ganière, assured that the recovery will be “weak and gradual”, since the supply of projects will take a long time to recover. “There will be much less job creation than before,” he said.
The goal is far away even with reforms
Mavoreidi and Cousin assure in their analysis that the pension reform “will continue to boost labor supply” but it is likely that the slowdown in growth and the increase in wages “will affect labor demand and there may be structural obstacles to raising the rate of unemployment below 7%”.
They reiterate that even if growth recovers “it may not generate as much employment as has been seen in recent years,” they explain. In the third quarter of 2023, Eurostat data shows that Employment grew by 6.9% compared to 2019while GDP only expanded by 1.9%, “which indicates a drop in labor productivity,” explain Mavoreidi and Cousin.
The consequence of this drop, together with the increase in wages, makes unit labor costs higher, which would motivate companies to focus on increasing productivity rather than hiring.
Macron announced in the middle of last month that he intends to make new labor market reforms this spring, tightening the conditions of unemployment benefits and at the same time strengthening active labor market policies, through training and broader support for job seekers. “This can also help achieve its objective” but “this can increase political tensions,” experts warn.
Therefore, Macron now finds himself in a situation in which he has to ease the rigidity of the French labor market to achieve his goal of full employment between now and the end of his mandate. The consequence of this: these rates will surely not be reached, social revolts will be generated and the extreme right will take advantage of them to gain voting intentions between now and 2027.