France’s Solid Labor Market Is Starting To Cool

By Charlotte de Montpellier of ING Economics

Friday, August 11, 2023 6:45 AM EST

Mockup, Screen, Smartphone, Website, Blog, Word

Image Source: Pixabay

France's unemployment rate rose slightly in the second quarter. The low point seems to have been passed, and the trend over the next few quarters is likely to be upwards.

The unemployment rate is still historically low, but no longer falling

France's unemployment rate stood at 7.2% in the second quarter, up slightly from the first quarter's low point of 7.1%. Despite the additional 20,000 unemployed, the unemployment rate remains historically low, down 1 point on its pre-health crisis level (8.2%).

Furthermore, the employment rate remained at its highest level since the start of the series (1975) and stable over the quarter at 68.6% (of the population aged between 15 and 64). There was a significant rise in the employment rate for the oldest age groups (55-64), up 0.7 points over the quarter.

A renewed fall in the unemployment rate in the coming months seems unlikely

From all the data published by INSEE, it's clear the French labor market remains very solid. Nevertheless, despite stronger-than-expected GDP growth in the second quarter, the trend is for the labor market to cool, and the unemployment rate appears to have bottomed out. A renewed fall in the unemployment rate in the coming months seems unlikely.

Signs of a deterioration in the economic outlook remain strong, and growth is likely to be weaker in the coming quarters. Indicators are also pointing to a further cooling in the labor market in the future; companies' hiring intentions are falling, especially in the services sector. Industrial companies are beginning to report more problems of demand than of supply, and the proportion of companies seeing the lack of labor as a factor limiting production is decreasing.

Nevertheless, this proportion remains at a historically high level. We believe that the worsening economic outlook should slow the pace of hiring by companies, which would hinder job creation and lead to a gradual rise in the unemployment rate over the coming quarters. After years of strong job creation, job destruction is likely to be seen in 2024 and 2025, leading to a slight rise in the unemployment rate. We expect it to be 7.3% at the end of this year, 7.4% in 2024, and 7.5% in 2025.

More By This Author:

FX Daily: Dollar Benefits From A Lack Of Alternatives
U.S. Inflation Boosts Case For No Further Rate Hikes
The Commodities Feed: Supply Risks From Australia Push European Gas Prices Higher

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.

The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.

Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.

less

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.