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In autumn 2003, an economic downturn has led to stagnation in the French labour market and an upswing in unemployment, which is nearing 10%. Job losses are increasing as bankruptcies and redundancy plans become commonplace throughout much of the economy, with some regions particularly hard hit.
Economic growth in France is currently at around zero. GDP for the second quarter of 2003 stood at the same level as a year previously, and was down by 0.34% on the previous quarter. Job creation has also come to a halt. The 1.2% sustained employment growth posted in 2000 in the market sector (FR0007179F) had fallen to 0.4% by late 2001 (FR0110107F) and has been hovering at around zero since around mid-2002.
The end of an economic cycle has been reached, with France now experiencing the same stagnation as in late 1996. A period of 'economic upturn' characterised by relatively sustained growth and particularly high job creation has now come to an end. Over a period extending from late 1996 to late 2002, GDP rose at an annual rate of 2.7%, which in itself was not exceptional. However, during this six-year period, the number of employees in employment rose by 1.9 million (an increase of 2.2% per year), an unprecedented performance since the beginning of the 20th century. The strongest period of job growth – 442,000 and 574,000 in 1999 and 2000 respectively - coincided with the implementation (FR9906190F) of the Aubry legislation reducing working time (FR9806113F and FR0001137F).
After these exceptional years, therefore, it is not surprising that the slowdown in economic growth should have an impact on employment. Economic and employment developments were in fact slightly out of step, apparently due to errors in anticipating the timing of the economic recovery. The failure of an economic turn-around to materialise and labour market readjustments have brought with them the threat of a rapid rise in unemployment. The unemployment rate had come down significantly, from 12.2% of the working population in early 1997 to a low of 8.6% in early 2001. Unemployment has now slowly, but increasingly surely, begun to creep up again. The rate now stands at 9.5% of the working population, and the majority of analysts predict that it will be hovering around 10% by the end of 2003. A fairly reliable sign of this upward trend is the disappearance of 47,000 temporary work agency jobs over the past 15 months. This sector is a good barometer for the labour market situation in general.
The number of persons seeking full-time open-ended employment now stands at 2.8 million – or 2.4 million when part-time workers are subtracted. Under this definition, unemployment fell slightly in July 2003. However, the government admits that this decrease is the result of 15,000 people being taken off the unemployment register. In addition, the new unemployment insurance agreement signed in December 2002 toughened benefit entitlement rules (FR0301106F).
The overall economic and employment pessimism is fuelled by a long list of company redundancy plans, which demonstrates that just about every sector has been hit. In the defence industry, GIAT Industries recently announced a restructuring plan affecting 3,750 jobs (FR0305101N and FR0307101N). However, this initiative, along with a similar one at Alstom axing 2,184 jobs has been put on hold (FR0306101N). Alstom was awarded an exceptional bail-out package, which has yet to be approved by the European Commission (FR0308101N). In the airline sector, Air Lib (3,500 jobs) is currently in court-ordered liquidation (FR0307103N). Alcatel (telecommunications) has announced that it is cutting a further 1,654 jobs, while the clothing chain Tati has declared bankruptcy, putting 1,200 jobs at risk. Schneider Electric has unveiled plans to cut 1,000 jobs and STMicroelectronics is to shed 600 employees. In the département of Finistère, the Doux poultry firm is to shed a total of 560 jobs, though trade unions claim that the real figure is actually double that.
Bankruptcies are increasingly responsible for a worsening climate. Some 24,810 companies were declared bankrupt in the first quarter of 2003, the highest number since 1999. The list includes Metaleurop (metalworking) (FR0302103N), Daewoo-Orion (cathode-ray tubes), Air Lib and ACT Manufacturing (electronics) - showing, once again, that a whole range of sectors are affected. Bankruptcy is not only striking down smaller companies but also larger ones, weakened by a poor economic situation and the strength of the euro against the US dollar, a reason which is also often cited as justification for relocation of production away from France.
While the Paris region remains relatively unaffected, bankruptcy announcements are having a major impact in other regions and at local level. For example, Groupe Eramet's announced closure of its Comilog iron-magnesium plant at Boulogne-sur-Mer will lead to a 50% reduction in traffic at the city’s port. Therefore, the closure carries implications that extend far beyond the 350 jobs directly concerned. Moreover, the whole metalworking industry in the Nord-Pas-de-Calais region has taken major blows since the beginning of 2003, with the closure of the Française de mécanique foundry at Douvrin (705 jobs) and the Metaleurop foundry in Noyelles-Godault (830 jobs), and the announcement of 430 job cuts at Sollac in Mardyck.
In the current context, it is hardly surprising that, according to opinion polls, employment is the number one concern for French public opinion. This anxiety is further heightened by the widespread view that there do not seem to be any policy options available to stem the seemingly relentless rise in unemployment. Current employment policies are largely focused on two ideas, making unemployment benefits conditional on recipients taking initiatives (ie active labour market policies) and cutting contributions. However, few observers believe that this will provide sufficiently strong stimulus for job creation in the current situation. At the macroeconomic level, France has already broken the terms of the EU Economic and Monetary Union's Stability and Growth Pact, while tax cuts have not had the expected effect on consumer spending. The consumer confidence index has reached rock bottom and savings levels are at a high.
The conservative government planned to fund two-thirds of its current pension reform (FR0309103F) through a reduction in unemployment-related costs resulting from a return to full employment. The obvious gulf between this optimistic scenario and the current state of affairs is a good indication of the government’s inability to bring any real influence to bear on the situation. (Michel Husson, IRES)