So François Hollande’s challenge has finally been met: unemployment at the end of his presidential term has fallen and is now lower than when he became president. This was a daunting task, but he reached his aim as the jobless total rose from 9.7% in the second quarter of 2012 to 10.5% in Spring 2015 before eventually falling to 9.6% over the first three months of 2017.
We have definitely seen a shift in the unemployment curve.
However, unemployment still has the potential to fall much lower as it stood at only 7.2% in the first quarter of 2008, so we cannot settle for such high joblessness, which is why fresh steps must be taken to make the job market more adaptable.
The aim here must be twofold: improve the French economy’s ability to create jobs when business is more buoyant, while also seeking to close the skills gap between available jobs and employees’/the jobless’ ability to meet them. It is vital for job growth to be able to flourish in the economy’s healthier sectors and for the French economy as a whole to be able to adjust more quickly to the overall economic cycle through employment and the capacity to garner the necessary human resources to drive buoyant sectors. However, this means cutting back jobs in declining sectors, as the country’s inability to cut jobs creates severe inertia and leaves it ill-equipped to reap the benefits of economic improvement. Sectors that do well after a recession are rarely those that drove the cycle before the dip, so it is important to be able to reallocate resources swiftly to reap the benefits of economic growth when it takes off. These factors are pro-cyclical in nature and can extend and reinforce growth momentum.
Two metrics clearly reflect these notions of the labor market’s reaction time. Continue reading
The current acceleration of the inflation rate creates a complex situation in the United Kingdom as it weighs on households’ purchasing power.
In April the inflation rate was at 2.7% and the core inflation rate was at 2.5%. The inflation rate has not been so high since the fall of 2013 and november 2012 for the core rate. This is mainly the impact of the depreciation of the currency after last june referendum on Brexit.
A year ago the inflation rate was at 0.3% and the core inflation rate was at 1.2%. This latter magnitude is worrisome as the economy is not growing more rapidly.
The main issue is that wages momentum will not follow the inflation profile. Continue reading
I have written a column for Bloomberg view on how the new French President must boost growth
You can read it here
The new French President, Emmanuel Macron, has won with a large margin. He had 66.1% of voters versus 33.9% for Marine Le Pen the other runner up.
The hierarchy of the numbers is consistent with polls even if the final numbers were above the top for one and below the weakest for the other. This is shown on the graph below.
The margin is wider than the 60/40 financial investors had in mind. They were optimistic with 60/40 as the French economy is doing well (see here). With a wider margin and probably with a majority for the new president at the National Assembly we can expect strong financial markets in coming weeks.
On the political side, the postponement of voters has worked well for Macron. In days before the vote, a lot of voters from Mélenchon, Fillon and Dupont-Aignan joined Macron as they didn’t want Le Pen as president after the debate (last Wednesday).
The watershed between Macron and Le Pen was Europe. (see here and here)
Macron wants to adapt the French economy to a globalized world with the help of Europe. He has in mind to strengthen European institutions. He also says that he wants to adapt the French competitiveness to the global environment. That’s why he wants a lot of reforms. On Le Pen’s side, the target was to exit from all European institutions. She has this populist view that by closing borders, jobs and growth can be saved. Continue reading
The result is expected to be 65% for Emmanuel Macron and 35% for Marine Le Pen.
Next steps: the prime minister, the general elections (first polls show that he could have a majority at the National Assembly) and the first measures on the labor market.
He will be in power on May the 14th