Cablegate: French Unemployment: The Neverending Story

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R 301514Z JUN 06
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UNCLAS PARIS 004546

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E.O. 12958: N/A
TAGS: EFIN ECON PGOV FR ELAB
SUBJECT: FRENCH UNEMPLOYMENT: THE NEVERENDING STORY

1. Summary: The drop in the French unemployment rate to 9.1 percent
could be due to GOF policies, as the GOF claims. It also might be
due to an aging workforce beating an early retreat to retirement.
And it might be due to statistical corrections. But the fact
remains that the youth unemployment rate exceeds 20 percent and the
long-term unemployment rate is 30 percent. Job creation in the
private sector has been moderate, and many workers are turning to
part-time work or multiple jobs, feeding a sense of insecurity
despite other signs of economic stability. End summary.

Unemployment Rate Falls to 9.1 percent in April
--------------------------------------------- --
2. The French unemployment rate (seasonally adjusted - ILO
definition) dropped to 9.3 percent in May, its lowest level since
September 2002. The number of unemployed (seasonally adjusted) fell
to 2.499 million from 2.544 million in April. The government
boasted that over the course of one year there were "258,000 fewer
unemployed, and the unemployment rate decreased from 10.1 percent in
May 2005."

Who Benefits the Most: Youth?
-----------------------------
3. The total unemployment rate (seasonally adjusted) dropped 1.8
percent in May compared to April, and 9.4 percent compared with
figures from the previous year. The sharpest decrease came in the
under-25 age category, where unemployment fell by 12.6 percent in
May compared with May 2005, but remained high at 21.9 percent.
Other age categories experienced less dramatic declines:
unemployment fell to 8.3 percent for those aged 25 to 49, while that
figure dropped to 6.3 percent for the 50 and over group. The ranks
of those affected by long-term unemployment (job seekers looking for
a job for more than a year), swelled to 707,000. That accounts for
a large chunk, 31.9 percent or nearly a third of total unemployment.

The Role of Demographics and Statistical Correction
in the Decrease in Unemployment
--------------------------------
4. The Labor Ministry's most recent data, covering the three months
ending in May 2006, shows a 6.6 percent decrease in the number of
new registrations to the National Agency for Employment (ANPE)
compared to the three months prior. Analysis suggests that this
drop-off in new registrations resulted from fewer people being laid
off or coming to the end of limited employment contracts, which
appears consistent with the current improvement in the business
climate. Interestingly, the number of first-time registrations to
the ANPE decreased 9.1 percent in the three months ending in May
compared to the three previous months, probably the result of a
sizeable demographic effect. A smaller number of unemployed were
removed from the ANPE's list in recent months. A closer inspection,
however, reveals that removal of people from the unemployment rolls
increased 5.1 percent on year-over-year basis. Removals for
auditing control and administrative removals are sizeable,
accounting for 58.9 percent of cases in May. Removals due to
recruitment of labor and the issuance of training contracts
accounted for 26.5 percent and 5.9 percent, respectively. Removals
related to health, maternity and retirement accounted for 8.7
percent. Unemployment statistics also exclude the unemployed aged
between 57.5 (or in certain cases as young as 54) and 64. They
receive unemployment benefits, but are not registered at ANPE as job
seekers. Based on a recent Labor Minister survey, they numbered
400,000 in 2004.

Economists Emphasize Demographic Factors
----------------------------------------
5. Private-sector economists emphasized that the country's aging
population has been responsible for part of the recent decrease in
the unemployment rate. "Baby-boomers," they argued, have begun
retiring en masse, effectively shrinking the active labor force and,
along with it, unemployment. Because they started to work at
extremely young ages, many 60-year-old workers and would-be
jobseekers are in fact eligible for retirement in 2006.

Opposition and Unions Stress Statistical Correction,
Point to Increased Poverty
-----------------------------
6. Some unions and opposition leaders have argued that the decrease
in unemployment numbers results from a "correction of data, notably
through the elimination of job seekers from the ANPE list due to
stricter regulations to attain unemployment status." Labor Minister
Borloo argued in response that there was a decrease in
administrative removals in April and May, but he failed to mention
the year-over-year increases. Unions also emphasized low job
creation, and an increase in poverty related to long-term
unemployment. The long-term unemployed still numbered 707,000
despite a decrease in May. Those suffering from long-term
unemployment are among beneficiaries of a minimum income ("Revenu
Minimum d'Insertion - RMI") reserved for the poorest in French
society.

Unemployment Decreases,
but Job Creation Remains Low
-----------------------------
7. Although the total number of unemployed decreased by 210,000
between Q-1 2005 and Q-1 2006, the numbers suggest that this is only
marginally attributable to the creation of new jobs. "Employment of
wage-earners in the non-farm private sector in companies with more
than 10 employees," the regular quarterly indicator for job
creation, increased a dismal 0.1 percent (15,300) compared with Q-4
2005 and 0.4 percent (63,000) observed when compared with Q-1 2005.
The industrial sector continued to shed jobs, while the construction
and service sectors were able to create more. Statistical and
demographic explanations aside, the apparent discrepancy between the
drop in unemployment and weak job creation numbers suggests that
hiring was concentrated either in the public sector or in companies
with less than 10 employees, neither of which are covered by
quarterly statistics but could have potentially benefited government
measures. Government labor policy and its effects will be examined
in a separate cable.

Labor Trends in 2005
--------------------
8. INSEE's (the National Institute of Statistics and Economic
Studies) March 2006 report on the previous year's trends ("2005
Employment Survey") showed that unemployment decreased 0.1 percent
to 9.8 percent in 2005 compared with 2004. This improvement
concerned primarily young women and women aged 50 and over. At the
same time, long-term unemployment increased for a second consecutive
year, also affecting mostly women -- 43.2 percent of women had been
unemployed for more than a year in 2005, and 21.5 percent had been
unemployed for more than two years. Employment did increase at a
slightly higher pace in 2005 compared to the previous two years, but
the employment rate decreased to 62.3 percent from the 62.4 percent
registered in 2004 as the number of people between the ages of 15
and 64 entering the workforce increased faster than hiring. The
service sector continued to create jobs, notably in education,
health, and social action (80,000) as well as in the administrative
sector (60,000). Job creation was dynamic in the finance (60,000)
and temporary labor sectors (60,000). Likewise, the real estate
sector also created 30,000 jobs. The industrial and agriculture
sectors, on the other hand, continued to lose jobs -- 60,000 and
40,000, respectively. Employment in agriculture dipped to below one
million for the first time ever in 2004. Employment in other
sectors remained unchanged. Women occupied most of the newly
created jobs, which more often than not were part-time positions.
Part-time work in general increased significantly in 2005, with 17.2
percent of the active population employed part-time compared with
16.6 percent in 2004, an increase concerning 167,000 workers.
Under-employment continued to rise as 1,300,000 out of 4,285,000
employees would have preferred to work more hours, a 40,000 increase
compared with 2004. Average work duration for full-time wage
earners increased to 39 hours per week in 2005, while the official
workweek remains 35 hours. The average work week was 40 hours in
the services-to-individuals, transportation, finance and real estate
sectors. For part-time wage earners, the average workweek remained
unchanged, slightly higher than 23 hours.

9. According to the Employment Survey, over a million workers in
France, mainly domestic female employees, had more than one employer
in 2005. Indeed, 1,126,000 wage earners had multiple jobs, including
783,000 who performed the same job but for several employers, and
343,000 who had several different jobs altogether. The portion of
the population working multiple jobs is sizeable, accounting for 4.8
percent of the labor force in 2005. The majority of these workers
were women with low education aged 40 and over. They work as
baby-sitters, nannies and in other domestic positions. In seven out
of ten of these cases, the main job is part-time (excluding
baby-sitting), but not necessarily by choice. Low wages and job
insecurity are common with this sort of work. However, workers with
several different jobs tend to be more highly educated than those
who hold only one job, and very often they work part-time by choice.

Comment
-------
10. Improvement in unemployment numbers was partially due to
demographic and statistical corrections, which may not therefore
have reflected true changes in the labor market. Moreover, the
unemployment rate, especially among youth, remained high. Long-term
unemployment as a percentage of total unemployment has been above 30
percent for years. On a more positive and encouraging note, the
length of the workweek has increased consistently in the
job-creating service sector. The participation of women in the
workforce has continued to develop. The fact that more and more
workers are taking on multiple jobs with lower wages suggests that
the labor situation is deteriorating rather than improving. End
comment.

STAPLETON

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