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Europe chart of the week – French unemployment


French unemployment fell surprisingly fast in Q4 2017, to a new cyclical low.

France registered the largest drop in unemployment in about ten years in Q4 2017. In metropolitan France, the number of unemployed fell by 205,000 to 2.5 million people, pushing the ILO unemployment rate down to 8.6% of the labour force (-0.7pp), its lowest level since Q1 2009. The improvement was broad based across age groups and worker categories.

It would be tempting to relate this spectacular drop in unemployment to last year’s labour market reforms, but these are only expected to produce their full effect over a longer period of time. If anything, we might be seeing the early impact of reforms implemented under the previous government, when Emmanuel Macron was François Hollande’s finance minister. Either way, the hope is that the Macron reforms will extend and amplify the current trend against a backdrop of very supportive growth conditions.

Indeed, the improvement in French labour market conditions looks increasingly structural like in most other euro area countries. The number of persons unemployed for over a year is falling at a similarly fast pace. The number of underemployed part-time workers dropped sharply in Q4, to its lowest level since Q1 2011, more than offsetting the increase in the unemployment “halo” (1.5 million persons who wished to work without being considered as unemployed). Last but not least, full-time permanent contracts as a percentage of total job contracts have been rising steadily since 2015. In all, French unemployment now stands below the government’s 9% estimate for structural unemployment. We expect the structural (natural) unemployment rate to be revised significantly lower over the coming years.

French unemployment fell surprisingly fast in Q4 2017

French unemployment fell surprisingly fast in Q4 2017

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Frederik Ducrozet
Mr. Frederik Ducrozet is a Senior Econoist at Banque Pictet & Cie SA, Research Division. Prior to this, he served as Senior Eurozone Economist at Credit Agricole Corporate and Investment Bank, Research Division from June 2006 till September 2015. He joined Crédit Agricole SA in 2005. Mr. Ducrozet contributed to the various publications of the research department, with a special focus on macroeconomic developments in Eurozone countries, including on the outlook for fiscal policy and the ECB’s monetary policy. Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.
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