The publication of the unemployment figures for the 3rd quarter constitutes a new disappointment. Jobseekers number has reached 3.72 million, a 0.5% increase compared to the previous quarter. However, a 1% fall is noticed on one year but these small variations must not divert attention from the main point. Unemployment stays at a very high level in France with a 9% rate for these who are registered at “Pôle Emploi” as having no activity at all. The rate is much higher if are added all the part-time employees who would wish to find full-time jobs. Even if the economy is creating more jobs than during the previous two years, it doesn’t create enough to make unemployment falling and to offer work to the young who are looking for it.
Hiring statistics seem to show a significant increase but it should not mislead because they mainly reveals the growing precariousness of the proposed jobs. If an employee is hired three times during the same year, it is difficult to conclude that the job market situation is improving in the same proportions. The cause of the harm is well known but the officials seem to have problems to recognize it. After a 2017 2nd half when it had been hoped that France was finding again a satisfactory growth trend, the stoppage observed during 2018 1st half with a near stagnation of the activity has had immediate consequences on the job market. The first estimation of GDP 3rd quarter will be released on October 30th. It would, following public administrations, show a small improvement but this will not be enough to put the French economy on a trend which will allow it to reach the government objective regarding employment with an jobless rate pulled back to 7% in 2022.
Where growth can come from? Definitely not from foreign trade which brings a more and more negative contribution. The continuous degradation of our goods exchanges testifies of that. Deficit came from 48 billion euro in 2016 to 62 billion in 2017. During the 2018 1st half only, it reached 33.3 billion and for the full year it will be near 70 billion due to the simultaneous increase of the oil prices and of the dollar. The most worrying point is about manufactured products which bring a growing contribution to the deficit. Major French companies, notably in the car industry, have chosen to delocalize their production, to the opposite of their German competitors, and to reduce the value added on their national territory. Tax incentives and the reduction of their social charges, which have been costly for public finances, have not, until now, incited them to change their strategies. Their resources are devoted to immaterial investments (innovation, marketing) whose results are, by nature uncertain, and not to the modernization of their equipments or to the building of new production units. The investment rate based on their value-added is misleading because that one is smaller than among our competitors because of delocalization. The conclusions of several think-tanks which were delighted by this result must be taken with cautious.
The building sector had, at the opposite, for several years, plaid a positive role in the support of economic activity. But the sector is at a turning point. Housing starts are stagnating since the beginning of the year and permits, which constitute a good advanced indicator, are falling since six months (-5%). Regarding public investments, they suffer the pressure of the government efforts to remain under the deficit levels imposed by Brussels. They are not anymore able, by themselves, to exercise a significant influence to offset the lack of vitality of the other sectors.
Household behavior is not more reassuring. Tax reductions have been concentrated on these who own a high wealth constituted by financial assets. They are now exonerated of the wealth tax on the part of these assets and their income tax rate has been reduced. But they are not numerous enough, and the related amounts are not sufficient to sustain internal demand and consumption. To the opposite, pensioners, who represent more than 15% of population suffer an increase of their social levies and a diminution, once inflation has been taken into account, of their pensions in 2018 and in 2019.
Regarding salaried, after the stagnation of their purchasing power during these previous years and a small improvement in 2018, energy prices rise and public services tariffs increases are threatening them, when employment is becoming more precarious and job market more worrying. The only real winners are these who have acquired their homes. They take advantage of the reduction of interest rates, of the rebound of inflation which reduce the real cost of their annual payments and of the rebound of real estate prices which increases the value of their assets. But that concerns a very small part of the population, these who have a revenue level and a professional stability which allow them to borrow.
An alarming signal, since the return home, is given by the withdrawals on saving accounts, much higher than a year ago and the deep fall of life insurance deposits. That well illustrates the pressure on the purchasing power and the worrying climate which starts to spread on the population. It is harbored by the economic and political line of the government. This one bet is based on the adoption of “structural reforms” which will permit to “transform” the French economy and allow it to recover a good growth trend. Unfortunately, all these reforms have, as a purpose, to reduce employee benefits and allowances granted by social protection systems. So it is not surprising that they are perceived as a threat on the personal situation of these who are targeted. They are moreover incited to adopt a timid economic behavior, completely in contradiction with the objective of a growth rebound and a fall of unemployment.
So the France disappointing economic achievements are not surprising. They have, as an origin three factors. The international environment is much less auspicious than a year ago. The oil price rebound is weighting on purchasing power and foreign trade accounts. The growing political instability in the world is worrying and doesn’t favor investment decisions. In France, the choice which has not been made yesterday, to put on the enterprises the mission to restore dynamism and to give them resources, has not obtained the expected results. The first two points are not under the State power. But it is fully responsible for the third one. That policy never delivered convincing results in France, even when the environment was favorable. In this new context it is even less appropriated.
The accumulation of bad news in the coming months, except if there is an electoral surprise in the U.S. which could attenuate worries about the stability of the world economy, gives to the government the opportunity to change the direction not only of its policy but also of its messages. It couldn’t have growth and economic success if these who work are not taking profit of it. It is not only an objective. It is also the way to achieve that objective.