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

Virtuous dynamics of employment in the Euro zone

There was a real improvement in the employment momentum in 2016 in the Euro Area. Employment growth was 1.3%, the best figure since 2007.
This dynamics will continue at least during the first half of 2017. The Markit sub-Index on employment suggests a real improvement in months to come.
Since 2014 the employment is upward trending and a positive profile. In fact it is since the end of austerity policies
ea-2016-q4-employment-markit.png Continue reading

Innovations and Employment – Part II

This is the English version of my weekly column for Forbes.
The original French version is here

This time is differentThis is often how the impact of innovation on the economy and jobs is perceived. Should we banish the broadly deterministic analysis I made in my last column (available here) or is this still the right approach? In other words, are innovation and employment complementary when all is said and done (this is the lesson that history teaches us according to Alfred Sauvy, and Paul Krugman’s model suggests the same interpretation), or is there a danger that the impact of innovation will be negative for jobs in the long term?

The “this time is different” theory does not work in a number of situations and so we need to remain cautious on this type of reasoning. Carmen Reinhart and Kenneth Rogoff wrote a remarkable book on the application of this notion to the financial crisis (“This time is different – Eight centuries of financial folly” Princeton University Press 2009). They suggest that during the various financial crises, “this time” is never really different even if spectators get caught up in the moment and view each crisis as a historical turning point at the time. Continue reading

Innovation and Employment – Part I

This is my weekly column on
It is available in French here

Here is the English version

The issue of robots and employment emerged recently during the French election campaign, with presidential candidate Benoît Hamon discussing two aspects of this matter at great length. The first aspect is job shortages caused by robotization of the economy: the result of this shift is to make basic universal income a necessity to offset the impact of these shortages on French citizens’ income. The second area involves taxing robots in order to finance the social model as well as education. I will look into these issues in detail in three successive columns. The first will deal with the traditional relationship between innovation and employment, the second will focus on the introduction of artificial intelligence and the third will discuss the issue of taxing robots and explore the key question of who owns these machines. 

The focal question here is employment and the effects of a more robot-based workforce on jobs. The taxation of robots is also key, as the various interpretations of this policy can have diametrically opposing effects. Continue reading

French households are optimistic on jobs

The momentum of the French labor market is dramatically changing.
The households’ confidence index for May was published by INSEE this morning. It was at its highest since October 2007. The crisis is almost over as confidence is back to its pre-crisis level. The most important point is the dramatic improvement of the labor market component of this index.
Households’ perception of the unemployment dynamics is at its lowest since June 2008. Again it’s back to its pre-crisis level. This is a radical change. Households are more optimistic on the future, for them individually and for all the French people.

Earlier this week, statistics on unemployment were published by the ministry of labor. The number of registered at the French Agency, Pôle Emploi, trends downward for the first time. This statistics includes people who look for a job even if they are able to work for a limited time during the month. This is a real improvement. We saw a change in trend in spring 2015 and now it’s a slowdown.
The labor market dynamics is changing. People’s perception of its momentum is now more positive and official statistics show a real improvement.
The current context in France is nevertheless very different when we see a lot of strikes on gasoline supply and in different sectors. This reflects  a real balance of strength between the government and trade unions. The main reason for these demonstrations is the fact that labor negotiations, in a new law on the labor market, could now take place at companies level and no more at a sectoral level. This could undermine trade unions’ power in the negotiation.

There is a clear opposition between the optimism seen in the different statistics and the social unrest. If this social unrest is not too long, the impact on economic activity will not be significant.
But we don’t know yet how the government and trade Unions will discuss (it hasn’t started). The risk is to lose credibility for the first who will accept a deal. But a deal is necessary to maintain household’ optimism.

My Macroeconomic column in 8 points: Will employment change the Fed’s strategy?

The main issue this week was the US employment figure as it may change the Fed’s mind on monetary policy. Nevertheless, employment is not the only aspect to mention to catch the US economy momentum. Another important issue, this week, is the rapid and deep drop of German industrial orders from outside the Euro Area. It’s a source of concern for the global investment dynamics. The last important point is the non-null probability of a rate lift-off at the Bank of England in 2016. Mark Carney has mentioned this possibility after the Monetary Policy Committee Meeting of the Bank. It’s not the first time that the BoE and Carney take this kind of commitment.

Eight points this week to follow the macroeconomic environment

1 – There was impatience to get the number of jobs creation in October in the US as it could be a trigger for a Fed’s rate move at its December meeting.
The number was strong at 271 000, way above expectations at 185 000. Nevertheless, the employment rate was almost unchanged for all classes of age and was unchanged for the 25-55 years of age. In other words, there were no supplementary pressures on the labor market even with employment surprising on the upside.
This figure comes after August and September during which the number of jobs creation was low. As a consequence, the average number of new jobs in the last 3 months is below the average of the 3 previous months: +187 000 in August, September and October versus 243 000 from May to July. Continue reading