Bloomberg News

Hollande Jobs Pledge Turning Into Achilles Heel as Claims Rise

February 26, 2013

France's President Francois Hollande

Francois Hollande, France's president, who made the promise to reverse the labor market trend this year during his New Year’s televised address, plans a new TV appearance in the weeks to come, his office said. Photographer: Balint Porneczi/Bloomberg

French President Francois Hollande’s promise to create jobs by the end of the year is turning into his Achilles heel.

Jobless claims rose last month to a 15-year high at 3.17 million, the labor ministry said yesterday. The increase brings such claims close to the country’s historic peak in January 1997 -- when they stood at 3.21 million -- with no signs they’ll fall any time soon.

While the Socialist president is falling behind on nearly every economic pledge he’s made for 2013 -- from growth to shrinking the budget deficit -- nothing is heaping more criticism on him, especially from his own supporters, than his inability to spur job creation as he promised.

“Hollande’s ministers have drummed up his jobs promise over and over again,” said Mathieu Plane, an economist at research institute OFCE. “It would have been better to have said that 2013 will be a year of sacrifices, with no expectations for the labor market. But they’ve painted themselves into a corner.”

Unions plan a nationwide demonstration on March 5 to protest job cuts and the government’s inability to address them, Bernard Thibault, the head of the Confederation Generale du Travail, or CGT, one of the country’s biggest unions, said on France Info radio yesterday.

“A credible reversal in the labor market in 2013 will need other policy options,” Thibault said. “The question is no longer whether unemployment will shrink this year, but how high it’ll be.”

Soaring Unemployment

Since Hollande’s May election, companies from PSA Peugeot Citroen (UG) and Air France (AF) to Sanofi SA have announced thousands of job cuts. The president’s own state-backed “Jobs for the Future” youth-employment program has created only 8,000 posts so far, against the 100,000 planned for the year.

France’s unemployment rate stands at 10.3 percent, the highest in 13 years. Youth employment is almost double the national rate.

For OFCE’s Plane, the youth-jobs program is a measure that at best can “limit the pain.”

“There should be a minimum of 1.5 percent economic growth to reverse the unemployment trend and we’re very far from that,” he said.

The European Commission forecast last week that the French economy will expand 0.1 percent this year, far short of the government’s 0.8 percent goal. The Commission said it expect France’s unemployment to rise to 10.7 percent.

Hope Yet

Hollande will also fail to keep his pledge to cap the budget deficit at 3 percent of gross domestic product, according to the EU commission, which estimates it’ll be closer to 3.7 percent. France plans to revise its targets between March and April.

To be sure, Hollande and his ministers continue to hold out the hope that they may be able to reverse the joblessness trend.

“I’ve asked the government to take all measures to keep our pledge,” he said on Feb. 23. “If there is no goal, there’s no will and I will not give up.”

Labor Minister Michel Sapin said yesterday that “even with growth weaker than what we hoped for, our jobs policies will enable us to reverse the trend.” Industry Minister Arnaud Montebourg said the European Central Bank should aggressively work on weakening the euro to help rekindle the region’s stalled economy by aiding exporters.

With growth falling short of expectations and the deficit set to be larger than predicted, Hollande is planning spending cuts and an increase in taxes next year.

More Taxes

The plan drew fire from his supporters. The head of Socialist Party called for a “halt” on more taxes. For 2013, the government added 20 billion euros ($26 billion) in additional taxes on companies and individuals and 10 billion euros in spending cuts.

“We must not add more taxes,” Harlem Desir told RTL radio on Feb. 25. “There are spending cuts to be made, efforts to make across all administrations.”

The opposition party, UMP, is also attacking Hollande, saying unemployment has risen at double the clip under Hollande compared with his predecessor Nicolas Sarkozy.

From June, the first month after Hollande took office, to December, jobless claims increased 6 percent. In the final seven months of Sarkozy’s tenure, jobless claims added 3 percent, as most companies froze job cuts before the presidential vote.

When Sarkozy started his mandate in May 2007, jobless claims shrank 5 percent in the first seven months. He promised a 5 percent unemployment rate for the end of his mandate. At the height of the financial crisis, from Oct. 2008 to April 2009, jobless claims rose 18 percent. Over Sarkozy’s term, they increased by 807,000, or 38 percent.

Social Turmoil

As jobless claims increase and long-term unemployment rises, worker protests are multiplying. The 1,173 workers of Goodyear Tire & Rubber Co. (GT:US) whose jobs are at risk, demonstrated with their spouses and children in their town of Amiens, in northern France, yesterday. The U.S.’s largest tire-maker plans to close the plant.

Earlier this month, a man immolated himself in front of a state employment office in the western town of Nantes. The number of workers getting minimum welfare payment, known as RSA, increased by more than 13 percent last year.

Hollande, who made the promise to reverse the labor market trend this year during his New Year’s televised address, plans a new TV appearance in the weeks to come, his office said. He may seek to revise his pledge as France’s economy proves him wrong.

“Even if the jobs objective is rendered more difficult by worsening economic conditions, all will be done to meet it,” Aquilino Morelle, Hollande’s political adviser, told Agence France-Presse yesterday, adding that there may be a “revision.”

To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net; James Hertling at jhertling@bloomberg.net


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