France: Don’t Be Fooled By The Fall In The Unemployment Rate

The fall in France's unemployment rate to 8% in the fourth quarter of last year, from 9.1% in Q3, cannot be considered as good news and is simply the consequence of the health situation. The crisis has not yet shown its true face on the French labor market.

A trade union-supporting protester in Toulouse earlier in February

A decline due to an increase in inactivity

In France, the unemployment rate (as defined by the ILO) fell in the fourth quarter of 2020, reaching 8% after 9.1% in the third quarter. Over one year, and therefore compared to the situation that prevailed before the health crisis, the unemployment rate is almost stable. At the time of the first lockdown, in the second quarter of 2020, the unemployment rate had fallen to 7.1 percent.

Given the current health context, this decrease in the unemployment rate over one quarter cannot be considered good news. Indeed, the unemployment rate is defined as the share of those actively looking for a job in relation to the active population, i.e. those who are looking for a job and those who have one. However, the health crisis and the lockdowns, including the one in force between 30 October and 15 December, are having the effect of discouraging some of those who wish to look for work or pushing them to refrain from taking the steps to find employment.

These people then fall into inactivity and are therefore no longer counted in the unemployment statistics. INSEE estimates that 4.1% of all 15-64 year old were in this situation in Q4, a figure that is slightly higher than the pre-crisis situation and comparable to the third quarter (4%). Nevertheless, this phenomenon is much less significant than that which prevailed during the first lockdown, when the share of 15-64-year-olds in this situation had increased to 6%, a historically high number.

Historically high underemployment

Moreover, the unemployment rate figures do not show the impact of the short-time working scheme. This scheme affected 6% of people in employment during the November 2020 lockdown and 3% in December. This is much less than the 25% observed in April 2020 during the first lockdown. Contrary to the situation prevailing in the spring, when most sectors had recourse to short-time working, short-time working was concentrated in only some sectors (accommodation and restaurants; arts, entertainment, and recreation; service activities). The extensive use of short-time working is not included in the unemployment statistics. But, it does lead to a decrease in the volume of hours worked by those in employment.

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