Labor law reform in France: momentum on the move

The Macron presidency is finally going to be able to unleash its full momentum. Talks between the government and trade unions on the broad trends for forthcoming changes to French labor legislation have taken up a good deal of time over the past few weeks. The government decrees were announced on August 31 and will come before the French Council of Ministers on September 21: the President’s term can now really get started.

The government’s aim is to make the labor market more adaptable to change by altering certain aspects of labor law. Continue reading

France: General elections – Second round – Employment and Europe in line of sight

The President-elect has won an overall majority after the general elections. His party will have 306 seats and 348 when the Modem, a close political party, is included (on 577 seats). Nevertheless, the new majority will not depend on ally (Modem).
It’s far from the tsunami that was expected after the first round. The new President majority will represent 60% of the seats (versus almost 80% expected after the first round) it is close to the average seen since 1981.
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France: General elections – First round

The French general elections will give an overall majority to Emmanuel Macron the President-elect. After the first round, yesterday, La Republique En Marche (LREM) his political party can expect between 400 and 455 seats on a total of 577.

Different remarks
1 – French people are legitimist; they have given a large majority to the new President enabling him to pass the reforms he announced during his campaign. This mustn’t be a surprise. The new President has always had a majority notably since 2002 as general elections follow the presidential election by a month. Nevertheless the LREM victory is large but not the largest as it can be seen on the graph below. Continue reading

The French Labor Market Reform

The French government has made its first proposals to reform the labor market. Its main idea is that competitive conditions have dramatically changed and it’s impossible to have a law that can solve all the issues.
For the government a “one size fits all” law cannot exist anymore on the labor market. The main reason is that companies face now very different environments that lead to a very specific framework for each of them. Therefore it can be efficient to commit to rules at companies’ level. These specificities are globalization which can be a very different constraint from one sector to another one, technological shocks with very different speed of adjustment depending on the type of activity, regulation can be very different between firms and sectors,  companies’ size from the very large company to a very small one is also an issue and specificities associated with different sectors can have an impact on companies’ behavior.

In other words, competition is not a uniform framework Continue reading

France ready and set for growth

French economic growth is set to step up a pace in 2017 and 2018. It will benefit from a more buoyant world context, which has been visible in the surge in world trade over recent months. It will also be driven by activity in the euro area, which is enjoying a situation that we have not seen for some time. Business trends are picking up across all countries in the zone, even Italy, and business leaders are now much more optimistic than they were a few months ago.

The situation in the Eurozone is also characterized by fiscal policy that has become neutral, and monetary policy that is set to remain accommodative for a while to come. This means that for such times as inflation stays well below the ECB’s 2% target, the central bank will not change its monetary approach. To add to this, oil prices are not expected to rise sharply, so long-term rates will still stay very low. This overall context promotes risk-taking and encourages investment.
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Job and unemployment momentum – the challenge of a presidential term

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