Key insights
- French unemployment rose to 8.1%, a five-year high, impacting Macron's economic record. A sluggish economy, exacerbated by geopolitical tensions, contributes to the rise. Increased minimum wage and stalled reforms add to economic challenges. While not directly impacting US equities, it reflects broader global economic headwinds.
France’s unemployment rate has jumped to its highest level in five years, dealing a blow to Emmanuel Macron as his presidency nears its end.
The unemployment rate hit 8.1pc in the first quarter of the year, marking the highest level since the pandemic in 2021 and pushing the number of jobless people in the country to 2.6 million.
The outbreak of war in the Middle East has sapped growth from an already sluggish French economy, which flatlined in the first three months of the year.
Jean-Pierre Farandou, the country’s labour minister, told French radio: “We expected an increase in the unemployment rate given the difficult economic environment, notably the war in Iran.”
The conflict’s impact threatens to further tarnish Mr Macron’s economic record as he approaches the end of his second term in April 2027. The French president cannot stand again and has said he will quit politics next year after a decade in office.
Mr Macron put tackling unemployment at the heart of his economic agenda when he swept into power in 2017. His changes, which reduced the role of trade unions and made it easier for bosses to hire and fire workers, helped push the unemployment rate to a four-decade low of 7.1pc by the end of 2022.
But joblessness is now steadily increasing amid wider troubles for the French economy. The country’s deadlocked parliament is struggling to pass any reforms that would rein in government spending, revive the economy and boost hiring.
Sébastien Lecornu, the prime minister, was forced last year to postpone a plan to raise the retirement age from 62 to 64, which would have helped reduce unemployment.
Unemployment is still below its recent 2015 peak of 10.5pc under Socialist president François Hollande, but is significantly higher than in Germany, Britain and Italy.
Mr Farandou on Wednesday also announced a “substantial” 2.5pc increase in the minimum wage to about €12.30 (£10.67) an hour.
A coalition of business groups recently told the Government that firms faced rising costs, shrinking margins, and wage negotiations that they said would “inevitably” follow the increase in the minimum wage.
In April, a government gauge of France’s business climate fell three points to 94. Outside the pandemic, it has not been this low since 2015, when France was emerging from the eurozone crisis.
Employers are now worried that the government, which needs to bring down a debt pile totalling 116pc of GDP, will remove payroll tax breaks for low-income workers.
Jordan Bardella, head of the populist National Rally party, wrote on X this week: “Unable to combat wasteful public spending, the Government will therefore drive up the cost of labour in France, already one of the heaviest in Europe and the world.”
Household confidence is also at a low ebb and consumption shrank in the first quarter. In the most recent Eurobarometer survey, 40pc of French people said the cost of living was their main concern, more than twice the proportion naming any other issue.
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