The unemployed population in France fell by 46,600 in September. In this respect, the third quarter was the best since 2007. However, if strikes were to increase in number, they could shorten what remains of positive momentum before the slowdown announced for 2020, explained Julien Manceaux – Senior Economist at ING.
Key Quotes:
In view of the results of the latest surveys in the service sector, which indicated a strengthening of hiring intentions, we expect the decline in unemployment to accelerate in the second half of the year after the 3.1% decline recorded in September. This would allow the unemployment rate to continue to fall in the second half of the year: we expect it to drop from 8.2% in June to 7.9% at the beginning of 2020.
Hiring intentions are at a 16-month high. However, this could change quickly. We have seen in the past that some strikes can affect the confidence of the service sector more quickly than an industrial slowdown. The first signs of unrest among railway workers in recent days, just before the autumn holidays, could remind French travellers of the difficulties of the 2018 Easter strikes (which cost 0.1pp of GDP growth) and put a brake on demand in the fourth quarter of 2018. Such a development would not, of course, be the primary cause of the upcoming slowdown in economic and employment growth, but by precipitating it, it would at the same time increase its costs in terms of employment.
With the French economy more dependent on services than industry, which accounts for around 15% of value-added (half of the German value-added), we believe that the most recent surveys confirm that the French economy should resist the current global slowdown longer than the rest of the euro area. GDP growth in 3Q19 will be published next week and should show continued strong domestic demand, paving the way for GDP growth of 1.3% this year. However, the last official projections for 2020, at 1.2%, are already looking rosy given the slowdown observed in neighbouring countries. As for the fall in the unemployment rate, we expect it to end with the slowdown in GDP growth around mid-2020, but it should accelerate to levels below 8.0% by then.
Share
