France’s jobless rate fell to its lowest in more than a decade at the end of 2007, official data showed on Thursday, surprising analysts who expected slower growth to brake unemployment’s fall.
President Nicolas Sarkozy’s centre-right government immediately hailed the figures -- released three days before the first round of municipal elections -- as evidence that its economic policies were working. The jobless rate for France and its overseas provinces fell to 7.8% in the Q4 of 2007, its lowest since the series started in the first quarter of 1996 and down from 8.2% in the Q3, statistics office INSEE said. “This is really good news since we have a continued decline in unemployment,” Economy Minister Christine Lagarde told i-Tele television.
Still, analysts were skeptical of whether falling unemployment would translate into more votes for the ruling UMP party given voters’ focus is firmly on the higher prices they are paying for daily items, particularly foodstuffs and petrol. “Higher inflation and uncertainty regarding the economic outlook will more than counterbalance the ‘feel-good’ effect of lower unemployment,” said Diego Iscaro, economist at Global Insight in London.
Can good news continue?
Economists predicted an imminent slowdown in the decline in joblessness. The measure most closely watched by the government -- the unemployment rate for mainland France -- fell to a 24-year low of 7.5%. “The main factors behind 2007’s improvement in employment were the construction and services sector, notably financial services,” said Jean-Christophe Caffet, economist at Natixis. “With the slowdown in the real estate market and the difficulties the financial sector is going through, it is unlikely these two motors will be continuing at full throttle.” The news was less upbeat on the fiscal side, with the Budget Ministry separately reporting that the central government budget deficit widened to €6.61 billion in January from €5.69 billion in the same month a year earlier.
The ministry played down the significance of the data, citing the usual volatility of tax receipts and a bigger payment to the European Union budget than was made last year, when France had benefited from clawing back 2006 overpayments. Still, economists will be paying close attention to whether the trend continues since slowing economic activity has put a question mark over France’s ability to meet its promise to its European Union partners to cut its budget deficit. (Reuters)