UPDATE 2-French unemployment rises again to highest since 1999

Thu Mar 7, 2013 6:18am EST

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(Adds trade deficit, analyst quote, minister, graphic link)

By Ingrid Melander and Vicky Buffery

PARIS, March 7 (Reuters) - France's jobless rate hit its highest level in more than 13 years in the last quarter of 2012, underscoring the challenge the government faces over its pledge to reverse the upward trend by year-end.

Thursday's official data prompted a renewed government plea for action at European level to spur growth as the euro zone's No. 2 economy shows increasing signs of languishing behind a more resilient Germany.

The rise to 10.6 percent is the sixth consecutive quarterly increase in the jobless rate in the French economy, which contracted 0.3 percent in the final three months of 2012.

It brings unemployment to its highest since the second quarter of 1999 and is the latest bad news for a government that has admitted it will fall far short of growth and public deficit targets this year. Other data published on Thursday showed a widening trade deficit.

"It is an uncomfortable truth for (President) Fran├žois Hollande and another sign that France may be joining the wrong side of the euro zone team," said Julien Manceaux, economist at ING Financial Markets, forecasting that unemployment would climb as high as 11.5 percent this year.

The European Commission sees French unemployment hitting 10.7 percent this year, nearly twice the level of Germany's 5.7 percent and not much better than Italy's 11.6 percent, but still far less than in Spain and Greece.

Hollande took power last May promising to halt a relentless rise in unemployment which has left one in four youths out of work and vowing to restore France's industrial competitiveness.

The president's approval ratings have slumped to around 30 percent since then as his government battles against a tide of factory closures. After backtracking last month on growth and deficit targets, he conceded the unemployment goal would now be harder to reach.

France's trade deficit widened to 5.9 billion euros in January from 5.4 billion in December, with a large chunk of the worsening data due to a drop in the sale of Airbus aircraft from 26 in December to 18, other data showed on Thursday.

BOOSTING GROWTH?

Industry Minister Arnaud Montebourg said worsening unemployment and bleak fourth-quarter GDP data across the euro zone, including in the bloc's powerhouse Germany, should push the European Union to take steps to boost growth.

"Europe and the euro zone are sinking. This is why the government is fighting, with the European Commission, for growth measures to be taken," he told France Info radio.

The Socialist government has already taken steps to boost competitiveness with measures to ease labour costs and a deal signed with mainstream unions in January to make hiring and firing laws more flexible to help companies weather downturns.

Hard-left unions oppose the agreement, saying it threatens job security, and led several thousand marchers in street protests in towns across France on Tuesday.

On Thursday, workers at tyremaker Goodyear, rallied in a Paris suburb against job cuts at a plant in the northern French city of Amiens, clashing with policemen, hurling paintballs and tyres.

The fourth-quarter headline unemployment figure, based on measurement criteria of the International Labour Organisation, was up 0.3 percentage points from the third quarter.

The total number of unemployed in mainland France was 2.9 million in the fourth quarter, national statistics office INSEE said. Just over a quarter of 15-24 year-olds were unemployed.

According to monthly figures issued last week by the labour ministry, which are not calculated according to ILO measures, mainland jobless totalled 3.17 million in January, the highest since July 1997 and close to the all-time high of 3.196 million.

Despite the bleak economic data, yields on long-term, fixed-rate French bonds largely fell at an auction on Thursday, underscoring the resilience of the country's bond market amidst renewed concerns over euro zone partners Italy and Cyprus. (Additional reporting by Raoul Sachs and Patrick Vignal; Writing by Ingrid Melander; Editing by Catherine Bremer and Stephen Nisbet)

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