French Unemployment Jumps, Increasing Pressure for Growth Push

French unemployment rose to a 13-year high in the second quarter as companies cut staff to cope with a stalled economy, adding pressure on President Francois Hollande to fulfil a campaign pledge to revive growth.

The jobless rate based on International Labor Organization standards climbed to 10.2 percent of the population from 10 percent in the previous three months, national statistics office Insee in Paris said today. Excluding France’s overseas territories, the rate was 9.7 percent, compared with a median forecast of 9.8 percent in a Bloomberg News survey.

With neighboring Spain and Italy in recession, the French economy has failed to expand for three quarters, and companies from PSA Peugeot Citroen (UG) to Air France-KLM Group are eliminating thousands of jobs. Labor Minister Michel Sapin said this week that jobless claims have already surpassed 3 million, a level last reached in August 1999, and will increase further.

“The increase in unemployment in France since the spring of 2011 is very worrying,” Natixis economists Patrick Artus and Jean-Christophe Caffet said in a note to clients before the release of the latest numbers. “The labor market hasn’t stopped deteriorating.”

The malaise is forcing Hollande to weigh business calls for a cut in social charges and promises to cut the budget deficit against labor union demands that he keep campaign pledges to avoid austerity.

Reviving Growth

So far Hollande has concentrated his effort at the European level, seeking to end a debt crisis approaching its third anniversary to revive growth in France’s main export markets.

Labor Minister Sapin said the government is considering revamping regulation to make the workforce more flexible and help companies cope with economic shocks.

France needs rules that “allow companies to adapt,” Sapin told Bloomberg Television last week. It’s about the “ability of companies to adapt to a changing world, changing technology and economic shocks.”

The government is also aiming to implement any tax increases needed to balance the budget in 2013 so that the burden is shared between consumers and businesses without driving investment abroad. “It needs to be done intelligently,” he said.

Hollande’s government is due to present its 2013 budget the week of Sept. 24. The finance ministry needs to find at least 33 billion euros in savings to meet its commitment to reduce the deficit to 3 percent of gross domestic product, according to the national auditor.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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