France: Unemployment rate failed to drop in the Q1 - ING

Julien Manceaux, Senior Economist at ING, notes that the France’s official unemployment rate failed to come down in 2016Q1 after the first 0.1pp drop in 2015Q4.

Key Quotes

“At 10.2% it remains historically high and is unlikely to change the public perception that Mr Hollande largely failed to tackle the problem before the 2017 presidential elections.

In France, the beginning of the year has brought some good news for the unemployed population that reached 3.53 million in March, down from 3.58 in December 2015. The first quarter saw a significant 50K drop in the unemployed population, after a total increase of 90k in 2015. Unfortunately, it did not prove sufficient to bring the official unemployment rate down, which remained at 10.2% in the first quarter (the fourth quarter being revised down by 0.1pp). Still, there is a slight improvement as this rate is the lowest since the beginning of 2014, but it falls short of expectations and shows that there is still a long way to go for the French recovery to materialize into much better job data.

Overall, these developments are not completely reassuring for the next steps of the recovery process. The French economic recovery is mainly based on domestic demand, as elsewhere in the Eurozone for the time being. If employment growth does not accelerate faster (hiring intentions in the service sector has been declining for two months in a row since February), the momentum in consumer confidence and spending could fade away quickly after the rebound registered in Q1 (largely a post-November attacks catch-up).

All in all, these figures remind us that it will take more than a temporary consumption rebound to put the French recovery back on track. Unemployment will be lower in 2016, but the pace of decline needs to accelerate if the recovery is to strengthen. At the current juncture, the first quarter figures leaves already the French Government growth target (1.5% in 2016) almost out of reach. We now expect French GDP growth to grow by 1.3% in 2016 after 1.1% in 2015.”