2024-02-13 15:16:40
The euphoria on the job market is well and truly over in France. In the fourth quarter of 2023, the unemployment rate, excluding Mayotte, reached 7.5% of the active population, according to data published this Tuesday by INSEE. It exceeds the level at the end of 2022 by 0.4 points.
While it had lost more than 2 points since the election of Emmanuel Macron, falling to 7.1% – the lowest since 1982 – the curve has started to rise again since the spring. At the end of December, the country had 2.3 million unemployed as defined by the International Labor Office (ILO), or 29,000 more than at the end of September.
The hardest part to come
Small consolation: after two consecutive quarters of progression, the unemployment rate stabilized at the end of the year. For Gilbert Cet, professor at Neoma Business School, there is even a good surprise in the statistics revealed by INSEE: “The employment rate continued to increase to 68.4% in the fourth quarter of 2023 and is now higher by 1.6 points to its 2019 level. This is the figure which measures the success of the reforms which have been undertaken,” he underlines.
However, the hardest part could be yet to come: in January, for the first time since April 2021, the employment climate indicator measured by INSEE fell below its long-term average, suggesting a gloomy outlook on the market. of work over the coming months, despite still high hiring reports.
France, like its European neighbors, is bearing the brunt of the effects of the tightening of monetary policy: for several months, economic activity has stagnated and the recovery looks sluggish. “While since 2021, companies have been hiring and investing massively because they have confidence in the future, this is no longer the case today,” observes Eric Heyer, director of the analysis and forecasting department of the OFCE.
Recovery in productivity
Affected by the sudden rise in interest rates, the construction sector is expecting massive job losses. Business failures are also accelerating, bringing job losses in their wake. In this context, economic institutes are all counting on a rise in the unemployment rate this year.
To the drying up of job creation linked to the deterioration of the economy will be added this year the effects of the gradual postponement of the legal retirement age, from 62 to 64, which is increasing the active population. In its mid-December forecasts, INSEE sees the unemployment rate rising to 7.6% in the first quarter then stabilizing in the spring. The Banque de France thinks that it will rise to 7.6% in 2024 and 7.8% in 2025.
Even more pessimistic, the OFCE expects a figure close to 8% this year. This projection is based on an increase of 0.6% in the active population over the period 2023-2024 linked to the pension reform, but assumes that 20% of these 177,000 additional workers will be unemployed.
Furthermore, while labor productivity has fallen sharply since the Covid pandemic, companies should start to correct the situation, according to Eric Heyer “Productivity gains will accelerate,” he assures. With the economic slowdown, some of the jobs maintained thanks to “whatever it takes” could be destroyed. Workforce hoarding within companies should also become less frequent.
Recessive effect
For the government, which is aiming for full employment by 2027, this expected deterioration in the labor market is not good news. Especially since the year promises to be more complicated than anticipated.
In the coming days, Bercy is expected to revise its growth forecast for 2024 downward, probably around 1%. Which could force it to find 10 billion euros in additional savings in order to meet its budget deficit objective. “This will inevitably have a recessive effect on growth,” warns the OFCE expert. At the risk of further depressing employment and complicating the executive’s equation.
“The direction of unemployment in France is absolutely decisive for the outlook for public finances,” recalls Bruno Cavalier, chief economist of Oddo BHF in a note published last November, while emphasizing that “given the reluctance of governments to reduce spending public, whatever they may be, the only way to bring the deficit below 3% in 2027 is for employment to increase.
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