The confirmation of a strict lockdown “at least” until December 1st announced by the Prime minister is confirming that the covid-19 pandemic is far from being under control. To the contrary, it has known from the end of the summer an important rebound with a rapid rise of the number of contaminated persons and hospital admissions. The number of sick people under reanimation has reached a level which is near the peak attained during the first wave in April. The pandemic had provoked an unprecedented recession of the French economy during the second quarter. The return to an almost normal activity had allowed a rebound during the 3rd quarter which has only partly offset the previous quarter fall. The new confinement, coming at the eve of Christmas shopping and holidays is going to stop this rebound and to generate a relapse of the French economy.
That one had been more affected than the other ones due to structural factors regarding the high share of services, especially tourism. According to the last estimations by INSEE, during the first three quarters of the year, GDP fell by around 10% year-on-year. In the whole euro-zone, there is a 7.5% fall with high disparities: in Germany, it retreated by only 6% when in Italy and in Spain the recession reached 10% and 13%. United Kingdom economy had same figures than France but the recession in the United States has been only 3.9%. At last, China emerged before everyone from the crisis and, as in all, would have registered a light growth (0.7%) during this period. This gap between the achievements of the major world economies would become bigger because the second wave will not have the same dimension everywhere. It seems well controlled in China and, in a lower extent in Germany. In the U.S., due to authorities laxness, if we except some major urban areas where restrictive measures have been taken, there is actually no second wave because the pandemic extension did not slow during summer. Hesitations about the launch of a rebound plan could also generate a deepening of the recession. To the opposite, the Chinese economy will go on with its rebound next year and Germany will slowly recover growth. At the contrary, in United Kingdom, in France and in Southern Europe countries, the economic situation will very likely worsen.
The new confinement will have, in France, heavier economic consequences than the first one, even if it is less strict, because it hurts already weakened sectors. The supporting measures taken during Spring were for a large share, transitory ones dedicated to help enterprises to go through a difficult period, with State-guaranteed loans and taxes and charges delays. The announced amounts, more than 120 billion, were striking public opinion through giving the feeling that everything was done “whatever it costs”, to protect production facilities. The financing of part-time work was the only one to constitute a definitive transfer. Regarding the others, it would have to be reimbursed. The economic relapse is coming to hurt already weakened enterprises, which hardly were trying to come back to a growth trend which would have allowed them to restoring their financial balances and to reimbursing the supports offered by the State or by their banks with the State guarantee.
Regarding household, the situation is not better. Sanitary worry has been accompanied by a major worry about, regarding these who had a job, the fear to lose it, and regarding these who were looking for one, the assurance that it will take much more time. So these who had steady revenue have accumulated a huge saving and the more fragile ones fell under poverty level. These problems had not fully disappeared after the de-confinement and the consumption rebound, set apart for some sectors the catching up effect, have been limited. The new lockdown, coming after the curfew in the major urban areas, will encourage precautionary behaviors, unfavorable to growth, and make worse the poverty rise in the country.
As another negative factor, the concerned period (Christmas) is precisely the one when household spend and travel. The restaurants and tourism sectors had almost saved their summer season, notably due to French family attitude which had preferred to stay in France. Their prospects regarding Christmas vacations, with the expected travelling restrictions are making feared a new activity fall for an already fragile sector with dozens of thousands of shops and establishments which probably won’t recover from that. As in the case of sicknesses, the economic relapse may have much heavier consequences than the first shock and constitute a real “coup de grace” which will generate a new firing wave.
Two indicators allow to assessing the job market situation, the number of jobseekers registered at the Employment Agency and the unemployment rate based of the definition of the International Labor Office. The first one gives, in Metropolitan France, at the end of September, 3 673 000 jobseekers, falling by 11.5% compared to 2020 2nd quarter. But this fall is not significant because it is accompanied by an equivalent increase of the number of jobseekers having a reduced activity. As a total, all categories included, the number of jobseekers increased by 4.4% year-on-year, i.e. 250 000 persons. The second indicator, the unemployment rate following I.L.O. rules, lead to the same conclusion but with a different advance. It had lowly progressed during the 2nd quarter because due to confinement, many people really looking after a job, could not make the steps and were not taken into account. To the opposite, through an increase from 7.1% to 9.0% during the 3rd quarter, the unemployment rate makes an unprecedented increase year-to-year and recovers the level reached at the end of 2017. These figures are especially worrying because they describe a situation where the State has already used substantial amounts to soften the effects on employment of the crisis, through a large financing of the keeping of activities which, without that, would have disappeared.
So, the return to work after the first lockdown is far from having written off its effects. The activity relapse which will result from the second wave of the pandemic and from the measures which have just been announced will then find a job market already very fragile. Consumer attitude will be again affected and it is illusory to think that they will have enough trust in their future to restart to consume, to make works in their homes or to acquire one, despite favorable financial conditions.
Many enterprises, despite the 3rd quarter rebound and an international environment less deteriorated, will not anyway take profit of that because they are frequently positioned on sectors, like fossil fuels, aeronautic or tourism which, for different reasons, are facing structural problems or the lasting consequences of the outbreak on their clients. Atop of that, to the opposite of Germany, they have few positions in China, which partly explains the gap between the results of the two countries.
Good news, because there are some, as the prospect of a vaccine or of the diminution of international tensions with the election of Joe Biden, or even the rebound of the Chinese economy, must not occult the specific difficulties France will be confronted with.