December 12, 2017 / 2:13 PM / 2 years ago

France expects slow but massive impact from labor reforms: minister

PARIS (Reuters) - President Emmanuel Macron’s labor reforms will be slow to bear fruit but eventually have a massive impact on France’s stubbornly high unemployment, his labor minister said Tuesday after data showed a slowdown in new job creation.

French President Emmanuel Macron welcomes guests for a lunch at the Elysee Palace as part of the One Planet Summit in Paris, France, December 12, 2017. REUTERS/Philippe Wojazer

Though business and consumer confidence has been soaring, France’s strengthening economy has so far only translated into limited labor market gains.

Job creation was the slowest in two years in the third quarter, when the economy added 44,500 new jobs, the fewest since the third quarter of 2015 and down from 88,300 in the previous three months, statistics agency INSEE said on Tuesday.

In his first major reform as president, Macron overhauled France’s labor rules in September to give companies more freedom to set working conditions, a move aimed at encouraging them to hire more workers.

“We can’t expect a massive effect in the very short term. It will only come in the medium term. However it will be robust and more massive,” Labour Minister Muriel Penicaud told journalists in a quarterly update on the jobs market.

Despite the improving economy, the unemployment rate ticked up to 9.7 percent in the third quarter from 9.5 percent in the previous three months.

Economists say this was probably caused by the end of a hiring premium for small firms and a reduction in the number of government-subsidised job contracts.

Only two percent of 1,000 French employers surveyed by staffing firm ManpowerGroup expect to expand their hiring plans in the first quarter of 2018, down from four percent expected for the final three months of this year.

However, the outlook varies widely by firm size, with 19 percent of companies employing more than 250 people expecting a net increase in hiring in the first quarter, according to ManpowerGroup’s survey.

After the labor reform, the government next wants to overhaul the professional training system, which currently receives 32 billion euros annually in public and private funds ($37.67 billion) but has little impact on unemployment.

“Companies cannot find skilled labor even though their order books are full. I hear that every day,” said Penicaud, who is a former human resources director at Danone.

Reporting by Leigh Thomas; Editing by Geert De Clercq and Mark Heinrich

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