No one is ever going to accuse the French of knee-jerk exuberance.
Case in point: the reaction to Monday’s announcement by government officials that France’s main unemployment index actually shrank in June the first reversal in rising joblessness since April 2008. Did the French cheer the news as a rare ray of light in an otherwise recession-blackened sky? Not a chance.
Pundits and economists were quick to pooh-pooh the announcement as either a fluke or statistical sleight of hand, warning that in the next few months France could see some brutal job cutting by companies. Even cabinet members seemed more inclined to hush the good news rather than hype it. “The trends remain rather negative, and may get even worse,” French Employment Minister Xavier Darcos told radio station RTL on Wednesday morning, less than 48 hours after official figures showed France’s main category of job seekers had shrunk by 18,600 between May and June. “This must be met with lots of caution, and one needs to remember the long-term view.” And what’s that, exactly Official figures estimate that 650,000 jobs will be shed between now and year’s end nearly double the 340,000 already lost during the first six months of 2009. And some observers think even that projection is a glimmer of optimism within France’s generally black outlook. Darcos says he believes the actual number of jobs that risk being slashed between July and December will probably be closer to 800,000. Unions predict an even scarier figure of around one million.
There are various explanations as to why France is expecting an avalanche of layoffs at the end of the year, many months after much of the rest of Europe had been hit. Some experts argue it’s a sign that the bite of recession which led to quick peaks in unemployment in countries like the U.K., Spain, and Italy has taken a bit longer to sink its teeth into France’s economic derrière. Other observers argue that French labor laws, which make laying workers off both messy and expensive, have led companies to put off staff reductions far longer than have businesses elsewhere. Telecom hardware maker Lucent-Alcatel, for example, announced this week that it will cut 850 French jobs and outsource 150 more its third major staff slash in France in a year. There’s speculation that PSA, the maker of Peugeot and Citroën cars, may also be forced to downsize or extend part-time work schemes after it announced a $1.37 billion loss for the first half of 2009. Even if that doesn’t happen, experts fear there are sufficient job cuts on the way to further raise France’s official figure of 2.4 million unemployed a number many employment experts actually put at 3.3 million once people who have dropped out of the dole system have been accounted for. “We are expecting around 20% to 25% more people to register as unemployed this September than we had in [Sept.] 2008,” Christian Charpy, director general of France’s Pôle Emploi state employment agency said in a news conference Monday. He added that those figures translate into about 35,000 newly laid-off people signing on every day. With numbers so big and the picture so somber it’s difficult to know where to go for a bit of hopeful thinking in France. Ironically, one place to start is with the nation’s economists, who have been tracking France’s slide into recession for months now. Many of those who had accurately warned about the turbulent economic times France is going through are now telling the employment Cassandras to lighten up a bit. “When you analyze company lay-offs in France over the past year, you discover only 60% of those have been justifiable due to declining business activity and GNP growth,” says Marc Touati, an economist and director general of Paris-based Global Equities Consulting. “The remaining 40% was either defensive anticipation or simple overreaction by French companies fearing drastic drops in business that haven’t been so bad. Because so much of that has been excessive, I think we’ll see that translate into less drastic action than expected through the end of the year.”
Touati and other experts don’t expect France’s current 9.3% unemployment rate to mimic the June surprise by shrinking any time soon. But improvement elsewhere especially in the U.S. and the positive impact of the French government’s $37 billion stimulus plan gradually taking effect may yet produce a less dire picture than many people are predicting. “It’s interesting how the French government reversed its early ‘Recession What recession’ stance to start depicting things in very grim terms,” comments Jacques Mistral, head of economic research at the French Institute on International Relations in Paris. “When leaders do that, they not only prepare the public for the worst-case scenario, but also will be able to claim credit for saving the day when that doesn’t pan out.”
If the worst is averted, a relieved French public probably won’t begrudge government officials those bragging rights. But, being French, it’s unlikely to go mad with joyous optimism, either.
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