The increase in unemployment despite a rising employment rate indicates a mismatch between job creation and the growing workforce, highlighting structural issues in the French labor market.
The reliance on non-salaried job creation, particularly through micro-enterprises, suggests a shift in the nature of employment in France, which may not provide the stability of traditional salaried positions.
The political situation, including potential budgetary constraints, poses significant risks to economic recovery and could exacerbate the challenges faced by the labor market.
If consumer confidence does not improve, the economic outlook may worsen, leading to higher unemployment rates and even lower GDP growth than currently projected.
Continued job losses in the private sector could lead to increased reliance on social welfare programs, further straining public finances and complicating future economic recovery efforts.
The impact of the RSA reform may not translate into immediate job-seeking behavior among beneficiaries, potentially prolonging the unemployment issue.
The French economy is facing a challenging outlook as the National Institute of Statistics and Economic Studies (INSEE) predicts a rise in unemployment and sluggish GDP growth for 2025. According to INSEE's latest economic report, the unemployment rate is expected to increase from the current 7.4% to 7.6% by mid-2025. This rise is attributed to a combination of factors, including the impact of pension reforms that will lead to an increase in the working population without a corresponding increase in job creation.
GDP growth is projected to remain stagnant, with estimates indicating it will not exceed 0.2% in the first two quarters of 2025. The report also forecasts zero growth for the fourth quarter of 2024, leading to an overall growth of just 1.1% for the year. Dorian Roucher, head of the economic outlook department, highlighted that the current economic signals from household and business surveys are concerning, although there is a possibility for improvement if consumer confidence returns quickly.
Job creation is expected to be insufficient to absorb the growing workforce. INSEE estimates that the French economy will create only 40,000 jobs over three quarters, primarily in non-salaried positions, which will not be enough to offset the increase in the working population. The private sector is anticipated to start reducing salaried positions, particularly among apprentices, while public sector employment is also expected to slow down significantly.
The report does not factor in the potential impacts of upcoming budgetary restrictions and the RSA reform, which will automatically register an additional 1.2 million beneficiaries with France Travail starting January 1. The political landscape and its implications for fiscal policy remain uncertain, further complicating the economic forecast.
