Social plans, economic difficulties… Is the unemployment rate set to rise?

A slight increase in the number of unemployed. According to data revealed this Wednesday, November 13 by INSEE, the unemployment rate within the meaning of the International Labor Office, that is to say without a job, who are actively looking for one and are immediately available, is increasing in France . It increased by 35,000 compared to spring (+0.1 point) and concerns 2.3 million people, at 7.4%. A relatively low level… even if the trend is worrying.

Because the context is not an inversion of the numbers. In recent weeks, several large, emblematic companies have announced the implementation of social plans, like Michelin and Auchan. The number of business failures is increasing, while France’s public accounts are in the red, which inevitably risks weighing on employment policies.

What should you expect? Will unemployment return to the country? Economist Éric Heyer, director of the Analysis and Forecasting department of the French Observatory of Economic Conditions (OFCE), responds to TF1info.

Public accounts are in the red, several companies are preparing social plans …Is France entering a new wave of unemployment?

Eric Heyer: It’s possible. In recent years, unemployment may have fallen too quickly. Since the health crisis, France has eaten its white bread: despite limited activity, we have created a huge number of jobs. Since 2019, the private sector has produced 5% more, while hiring 6.5% more employees. These job creations were too strong, not linked to structural reasons, with a loss of productivity. A return to normal was to be expected after some very good performances.

During the crisis, the state saved a large number of companies that should have gone bankrupt

Eric Heyer

Why were there “too many” jobs created?

Three reasons can explain this. In recent years, apprenticeships have been massively subsidized: from 300,000 apprentices in 2019, we are now close to a million. However, this is expensive, more than 25 billion euros each year. Now the government says stop. Apprenticeship will stop supporting employment. There was also a retention of labor: many companies should have laid off staff, but did not do so thinking that activity would pick up again. Except that the business outlook has collapsed, so companies are adjusting. The third reason is the public aid granted to businesses during the Covid-19 crisis.

Shouldn’t it have been done?

Yes, many companies have been saved. Normally, there are between 45,000 and 67,000 business failures each year. But during the health crisis, we went down to 28,000. This created a “zombification” of the economy: the state saved a large number of companies that should have gone bankrupt. Which saved, according to our estimate, around 180,000 jobs. Today, the time has come for businesses to repay state-guaranteed loans. Those who cannot fail.

The goal of full employment? Very unlikely to be reached

Eric Heyer

Direct consequence: unemployment increases, but to what extent?

We believe the unemployment rate will reach 8% by the end of 2025 (its level at the start of 2021, editor’s note). For 2026, everything depends on the growth scenario. If it picks up strongly, it will not create jobs without destroying them, which will stabilize unemployment overall. But if there is not much growth, jobs will be destroyed. This second scenario is the most likely, which will lead to a further increase in unemployment.

Emmanuel Macron nevertheless hoped, during the 2022 presidential campaign, to return to full employment, i.e. around 5% unemployment . Mission impossible ?

This objective is very unlikely to be achieved. We must always be careful, we are never safe from good news. Still, the international situation is complicated: the election of Donald Trump in the United States will be rather negative for growth in the euro zone. The national context is no less so, with a restrictive budgetary strategy until the end of the five-year term. There should therefore be little domestic demand and little external demand, therefore very little reason for activity to pick up significantly in France.

• Read also

  INTERVIEW – France’s debt: “We are all going to pay”

What would be the conditions of this “good news”?

The French have over-saved since the crisis. The only possibility would be that they get a craving for consumption and dip into their savings to maintain growth. This is not our scenario, but the government believes in it. In the short term, there are still more reasons to think that activity will not pick up again rather than the opposite. Above all, we risk finding ourselves in sluggish growth, around 1%, which does not create jobs.