French Unemployment Climbs to 13-Year High as Growth Stalls
French unemployment climbed to a 13- year high in the fourth quarter as companies eliminated tens of thousands of jobs to cope with a stalled economy.
The jobless rate based on International Labor Organization standards rose to 10.6 percent from a revised 10.2 percent in the previous three months, national statistics office Insee in Paris said today. Excluding France’s overseas territories, the rate was 10.2 percent, compared with a median forecast of 10.1 percent in a Bloomberg News survey.
Faced with an economy that fell back into recession early last year and risks doing so again, companies such as PSA Peugeot Citroen (UG), Renault SA and Alcatel-Lucent are slashing payrolls. That’s adding pressure on President Francois Hollande who is trying to retain support of unions while attempting to revamp Europe’s second-largest economy in the wake of the region’s sovereign debt crisis.
“Unemployment will likely rise further in coming months, with the peak only coming at the end of the year or early next year,” said Joost Beaumont, an economist at ABN Amro in Amsterdam. “The economy may gain some traction in the second half but it’s unlikely to be enough to induce companies to start hiring in a serious way.”
Hollande, elected last May, has said he aims to revive growth and reduce joblessness by the end of his five year mandate by improving French competitiveness.
His Socialist government yesterday endorsed a plan to overhaul French labor law to add flexibility in legislation that lawmakers will vote on later this month.
This proposal “is a win-win for companies faced with difficulties that need to re-organize,” Prime Minister Jean- Marc Ayrault told journalists after a cabinet meeting. “This legislation will preserve jobs.”
There are some signs that Hollande is managing to retain the support of unions as he attempts to repair French competitiveness. Renault SA (RNO) won backing of two main unions yesterday for a plan that will eliminate almost a fifth of its French workforce over the next three years, freeze wages for 2013 and increase working time.
Unions who oppose the new labor legislation had fewer than 10,000 people at protests in Paris earlier this week, prompting Le Figaro newspaper to call the opposition movement a “flop” in a front page headline.
Even so, it may take years before the French economy starts to benefit from Hollande’s reform push, which includes a cut in payroll taxes and reduction in government spending.
Meanwhile, his poll numbers are dropping. His approval rating fell by five points to 30 percent this month, making him the most unpopular head of state since 1981, according to a TNS- Sofres poll published Feb. 28. His predecessor Nicolas Sarkozy had a 37 percent rating at the same point in his presidency in March 2008.
The European Commission forecast last week that the French economy will expand 0.1 percent this year, far short of the government’s 0.8 percent goal. Slower growth also means France will miss its target of reducing its budget shortfall to 3 percent of gross domestic product in 2013. The Commission said it expects the French budget deficit at 3.7 percent of GDP and unemployment at 10.7 percent this year.
“High deficits and unemployment are accelerating” the drop in support for Hollande, said Carine Marce, a political analyst at TNS Sofres. The economic news suggests “he can’t keep up with his promises.”
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