France – Low growth is a drag on employment

The number of jobs in competitive sectors dropped by -0.1% during the first quarter of 2013. 20 300 jobs have been lost. The chart below shows that employment profile is not linear.


From a very basic analysis we see that periods with strong jobs creation are also period of strong growth. This was the case before the first oil shock, at the end of the 80’s and of the 90’s also and in 2005-2007.
Having growth as the first economic policy target can make sense instead of trying to improve too rapidly public finance equilibrium.
We see also that the number of jobs during the first quarter of 2013 is very close to the level seen at the beginning of 2002. This observation can justify the labor market reform that was voted by the parliament last month. The new law wants to transform the labor market in order to gain in flexibility and in efficiency..

In the short run the link between growth and employment change can clearly be seen from the following chart. Each indicator has been based at 100 during the first half of 2008 before the Lehman Brothers bankruptcy.


The long period of slow GDP momentum has implied a lower trend on jobs. In the absence of recovery companies reduce their number of jobs to remain profitable. These 2 trends on growth and on employment will continue in 2013. The French government is expecting a +0.1% GDP growth number (I think that even with a recovery in the second half French GDP growth will be negative (between -0.1 and -0.2%)). As is shown on the second chart labor downside adjustment will continue.
Nevertheless, looking at details the picture is not necessarily so bleak. On the third chart we see an improvement in temporary jobs during the first quarter(grey bar). Usually it’s a an advance indicator, a signal of positive change in the future. That was the case in 2009 and 2010.
The picture on the French labor market may be is brighter than expected. We will monitor that very carefully.