French labor market likely to perform better in near-term

Two of France’s three key labor market indicators in the first quarter of this year saw a good result while the third one came in negative. The jobless rate dropped sharply and the non-fam payroll employment sustained another solid rise. These two favourable results offset the negative signal from the rise in the number of category A jobseekers, which includes those who did not work at all. But this rise comes after four straight quarters of decline, and the monthly data shows that the quarterly rebound was because of a jump in March, noted BNP Paribas.

The jobless rate’s sharp reduction in the first quarter to 9.6 percent aids in amplifying the downtrend that started in mid-2015, with a cumulative drop that is quite close to 1 point. The French unemployment rate has finally dropped well below the 10 percent threshold for the first time since third quarter 2012, and is now at the lowest level since the first quarter of 2012.

This probably paints an overly positive picture of the rebound currently underway. It is very rare to see the jobless rate drop so sharply in just one quarter. In the past, this has occurred only during periods of strong growth. However, the French economic growth cannot be called strong today. There is a rise in job-content of growth, and its capacity to create several jobs in spite of a relatively sluggish growth rate.

Last year, non-farm payroll employment even rose at the same pace as GDP, at an average annual rate of 1.1 percent. This is not a strong pace of rise for GDP growth; however, for employment this is the highest growth rate since 2007. The employment and GDP gave the same performance at the end of the first quarter of this year. According to BNP Paribas, prospects for the near-term growth and employment look good and better than the first quarter, based on the improvement in May in business and employment climate indicators.