French employment take-off delayed
The employment figures show the economic recovery hasn't reached the labour market. However, we expect things to turn a corner in the second half of 2018, bringing the unemployment rate back to 9%
| 575,000 |
Jobs createdIn the last three years in the private sector, or a 3.1% growth |
French unemployment remains sticky
French employment increased by 0.2% in 3Q17, reaching 27.95 million people while yearly growth was stable at 1.1%. Private payrolls increased by 50k, the weakest pace in two years, while public employment declined slightly. The slower growth in private payrolls may seem worrying as a lot of French economic indicators are back in the green zone. However, employment is a lagging indicator that will take time to be supported by the French recovery.
French unemployment was still at 9.4% in 3Q17, higher than at the beginning of this year. An explanation is that 72.4% (on average) of unemployed people that were on one of President Hollande’s subsidised job schemes or training did not find a job after that period and are now flowing back into the unemployment statistics.
Over the first ten months of 2017, this amounted to 65k, which explains why the unemployed population has increased by 16k so far in 2017 after the 113k decline in 2016, despite the acceleration of the recovery in the second half of this year.
Employment growth should bring unemployment down in 2018
But the story could change in the second half of 2018
As employment is a lagging indicator of economic recovery, the current situation is not puzzling. The French recovery started at a slow pace in 2014, boosting private employment growth only very slowly. It took three years to go from no growth on average to 1.4% YoY so far in 2017.
This rhythm is however still too low to trigger a fast decline in unemployment. However, with GDP growth accelerating towards 2.0% in 2018 and supportive labour market reforms, employment growth should accelerate further in the second half of next year. This should allow for unemployment to decrease to 9%.
The political context will remain supportive of the labour market reform materialising in 2018 and tax cuts on low wages will stay on the menu for coming years. Finance Minister Le Maire recently suggested that this reduction of French labour costs through tax cuts could be extended to higher salaries (currently it is limited to 2.5 times the minimum wage).
Moreover, President Macron has pledged a large investment plan in training which aims at increasing the hiring rate of trained unemployed and broadening their number. We believe that these measures will push up hiring intentions which peaked in the service sector last March.
Download
Download article"THINK Outside" is a collection of specially commissioned content from third-party sources, such as economic think-tanks and academic institutions, that ING deems reliable and from non-research departments within ING. ING Bank N.V. ("ING") uses these sources to expand the range of opinions you can find on the THINK website. Some of these sources are not the property of or managed by ING, and therefore ING cannot always guarantee the correctness, completeness, actuality and quality of such sources, nor the availability at any given time of the data and information provided, and ING cannot accept any liability in this respect, insofar as this is permissible pursuant to the applicable laws and regulations.
This publication does not necessarily reflect the ING house view. This publication has been prepared solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved.
ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam).