French unemployment rises again to 10.6 per cent in Q4, putting new pressure on Hollande

PARIS – France has yet to hit bottom. The unemployment rate in Europe’s second-largest economy rose again in the last quarter of last year to 10.6 per cent, putting new pressure on President Francois Hollande’s rollout a controversial labour-market reform.

The national statistics agency Insee said Thursday that the jobless rate rose 0.3 per cent point, from 10.3 per cent in the third quarter of 2012.

Concerns about high debt amid a slowing global economy have driven up unemployment rates across Europe. While France has avoided the worst of the crisis thus far, its high and rising unemployment rate indicates its economy is also in trouble.

Its gross domestic product has shrunk for three of the last four quarters, and some expect the economy will enter another recession in the first part of this year. A recession is technically defined as two consecutive quarters of negative growth, but economists say that France’s high unemployment rate is already recessionary. Unemployment rates also tend to lag behind economic growth, so the rate will likely continue to rise.

French unemployment has been climbing steadily since last year after dropping for a few quarters. It is now higher than at any time since 1999.

Hollande has promised to stop the rise of unemployment this year, and a labour-market reform unveiled Wednesday is at the centre of those efforts.

France’s hidebound labour rules make it very difficult to fire workers, even in times of economic difficulty, and that has long made employers reluctant to hire. Even in economic boom times, France’s structural employment has remained relatively high.

Hollande hopes to loosen those rules, while still maintaining robust worker protections that the French consider at the heart of their way of life. The new plan would offer companies in financial difficulty more flexibility in setting working hours and salaries. The government hopes that will help businesses stay afloat, instead of shutting down factories or moving production to countries with cheaper labour.

France’s leading employers’ group and three top unions negotiated the compromise in January, and it was formalized into a draft law at a Cabinet meeting Wednesday. Two hardline unions oppose it, saying it’s too generous to bosses.

The bill now goes to the parliament dominated by Hollande’s Socialist party, and the government is hoping it can be in place by the end of April.