Will the unemployment curve reverse in 2024? After several consecutive years of decline, the French unemployment rate is showing worrying signs. Employment in sharp decline, temporary employment running out of steam, job destruction in construction…Emmanuel Macron’s promise to achieve “full employment” could quickly fade away.
In its latest macroeconomic projections unveiled Monday September 18, the Banque de France now expects an increase in unemployment within the meaning of the International Labor Office (ILO) between the end of 2023 and the end of 2025, rising from 7.2% to 7.8%. In fact, the institution has revised its June forecasts downward (7.4% in 2024 and 7.6% in 2025).
This increase, however, is far from being a surprise. After the dizzying Covid years, the executive drastically closed the tap of aid for businesses and households. At the time of the shutdown of the French economy, the State had deployed a vast arsenal of tools to limit the economic and social damage (PGE, solidarity fund, partial unemployment, exemptions from contributions, deferral of deductions). As a result, many companies have been able to retain a large part of their workforce. But the situation has changed.
A reduction in staff numbers from next year
As a result, many economists expect companies to cut their workforces. After a sharp increase in 2022 (775,000), job creation in France should clearly run out of steam in 2023 (319,000), before falling (-60,000). Regarding 2025, the figures could be even poorer (-80,000). According to the Banque de France, these projections should better correspond to the level of French activity.
Indeed, the growth in job creation has been significantly higher than that in activity during these recent quarters. “There is the beginning of a correction of this phenomenon of low growth rich in jobs”, explained Olivier Garnier, general director of the Banque de France interviewed by The gallery. This paradox of low growth rich in jobs plunged economists into a thick fog and revealed the limits of the models used by forecasting institutes. “Employment is the subject on which we have been most mistaken in recent quarters” , conceded Olivier Garnier during a press point.
Partial recovery in productivity
This slowdown in employment should allow the French economy to return to productivity gains greater than the years of the peak of the pandemic. Productivity, that is to say the wealth produced per job, had recorded relatively low levels since the spread of the virus throughout the economy.
Added to this was the surge in hiring of apprentices which also confused the calculation of productivity in companies. “Apprenticeship affects productivity because apprentices are counted full-time,” underlined Olivier Garnier. The reduction in apprenticeship aid planned by the government and the adjustment of supply and demand for work on the job market should make it possible to have more productive jobs. However, the Banque de France does not expect French productivity to catch up to pre-pandemic levels before 2025.
The rise in rates weighs on employment
The tightening of monetary policy on both sides of the Atlantic is weighing on employment prospects. Last Thursday, the European Central Bank (ECB) announced a tenth increase in its key rateswhile several economists were sounding the alarm about the deleterious consequences of such a decision on the labor market.
The price index has certainly slowed down in Europe thanks to an unprecedented rise in rates since the creation of Monetary Union in 2022. But the spectacular fall in demand on the Old Continent (business investment, household consumption ) risks having violent repercussions on the activity. In many sectors already losing momentum since the pandemic, some companies are far from having regained their level of activity preceding the health crisis. This gloomy outlook could further slow down hiring in the months to come.
