sounds familiar

In France, where are the jobs?

PARIS French unemployment, a scourge that has haunted successive governments, is on a downward trend, slipping to its lowest level in almost three years at the end of last year.

But as ministers welcomed the decline as a sign that recent labor-market measures were showing early results, economists pointed to a conundrum: Unemployment might be down, but there was little sign that jobs were being created.

"Where are the jobs?" asked Laure Maillard, an economist at Ixis CIB in Paris. "It's one thing to lower unemployment and quite another to create work - and by extension economic growth."

After peaking at 10.2 percent in May, France's jobless rate has been falling steadily every month, dropping to 9.5 percent in December.

In the second half of the year the number of registered job seekers declined by a monthly average of 24,800 people. But an average of just 300 jobs a month were created in the private sector in the third quarter, the latest for which figures were available, according to the French statistics office, Insee.

That suggests that the decline in the jobless toll is the result of a growing number of people coming off unemployment benefits as the government tightens access and, maybe more significant, of a decline in the working-age population as the first wave of baby boomers begins to retire, economists said.

Unemployment and job creation used to be two sides of the same coin, said Philippe Waechter, an economist at Natexis Asset Management in Paris. No longer. "The link between the two is in the process of weakening and that means unemployment statistics are less meaningful," Waechter said. "It is much relevant to look at job creation figures and participation rates."

On that count business surveys do not bode well. The latest quarterly survey of French executives, published on Monday, showed that companies did not plan to increase their payrolls in the coming quarter.

A number of government measures announced in recent months might have helped persuade some executives to step up hiring, giving hope in Paris that job creation climbed in the fourth quarter. Prime Minister Dominique de Villepin has established tax breaks for companies that recruit apprentices and subsidies for recruiting temporary staff in the nonprofit sector. He also created a new work contract for small companies that prolongs the probation period to two years from six months, effectively making it easier for employers to cut jobs.

According to Nicolas Sobczak, an economist at Goldman Sachs in Paris, the recent measures were unlikely to have made a big impact. But, he said, they could prove an important step in tearing down psychological barriers to reform in France.

"By showing people that reducing job protection in some areas does not lead to higher unemployment, they might make it easier to broaden the reforms to all companies later on," he said.

- International Herald Tribune, 1 Feb 2006.