Looking at the job market situation in France at the end of 2021, the shock created by the Covid-19 pandemic already seems to have been partially absorbed (chart 1). Far from a prolonged increase in unemployment, the jobless rate has begun to fall again: at 7.4% at year-end 2021, it is even lower than the pre-Covid level of 8.1% at year-end 2019. As a result, the jobless rate is now near the Q1 2008 low of 7.2%. At the same time, the employment rate also began rising again: at 67.8% at year-end 2021, it is the highest since the 1970s and nearly 15 points higher than the low of 1994. Job support measures, especially job retention mechanisms, largely neutralised the impact of lockdown measures and helped preserve jobs.
EMPLOYMENT: LOOKING BEYOND APPEARANCES
France: employment and unemployment rate (% of active population)Between 2017 and 2019, the job market was robust with nearly 760,000 job creations. The pandemic reversed this momentum for a few quarters, but only temporarily. Nearly 370,000 jobs were destroyed in 2020, but 700,000 new jobs were created in 2021 (based on a comparison of employment figures at year-end 2020 and year-end 2021). This labour market momentum was unprecedented, with nearly 640,000 job creations in the private sector.
Nearly half of the private sector’s performance was in sectors hit hardest by the Covid-19 pandemic in 2020: temporary employment services, accommodation & catering services, and to a lesser extent, the entertainment industry (chart 2). Excluding these three sectors, the private sector reported 324,000 job creations, which falls short of the 428,000 job creations reported in the record year 2000.
France: net job creations in the private sectorThis raises another question: Did the post-Covid rebound erase the shock’s impact on the labour market? In other words, did employment reach the levels that would have prevailed at year-end 2021 if the job creation trends observed in 2017-19 had continued?
Based on this comparison, the level of employment in the non-market services sector was 135,000 jobs higher, including 76,000 more jobs in the public sector. This trend was most striking for healthcare and education, since the pandemic has a positive impact on employment in these sectors.
France: job levels compared to pre-Covid trendsIn contrast, there was a shortfall of nearly 260,000 jobs in the private market sector, excluding temporary employment services (chart 3). In industry, the shortfall of nearly 60,000 jobs is in keeping with the cutbacks in production capacity observed during the Covid period.
Yet the biggest shortfall from the levels that would have been reached if pre-crisis trend would have continued was in the market services sector, where employment was down by nearly 200,000 jobs, a third of which were in accommodation & catering services, a quarter in business services, and a sixth in transport and warehousing. In contrast, in agriculture and construction, employment levels are relatively in line with the levels that would have prevailed without the pandemic.
The breakdown of temporary employment services by business sector does not change the trends observed in chart 3, except in industry. After taking this into account, the shortfall in employment is reduced by half, especially in the chemicals, pharmaceuticals, iron & steel and agri-food industries.
All in all, private market sector employment was 1.3% below the level that would have prevailed at year-end 2021 if pre-Covid growth rates had been maintained. In comparison, using the same methodology, real GDP was 2.2% below its theoretical level.
LONGER CAREERS FAVOUR A HIGHER EMPLOYMENT RATE AND LOWER JOBLESS RATE
France’s employment rate is still 1.5 points lower than the European average, mainly due to later entry into the labour market and an earlier retirement age. Yet significant progress has been made in both of these areas.
France: employment rate by ageThe oldest 50-64 age group has seen a structural increase in the employment rate since the mid-1990s (chart 4). One explanation is the increase in the employment of women (regardless of the age group). The employment rate for the 50-64 age group also depends directly on the age of retirement. There was a notable decline in the employment rate in the 1980s when the legal age of retirement was lowered from 65 to 60. Since then, adjustments to the legal age of retirement have been accompanied by the prolongation of the pension contribution period and by the extension of the age of retirement at full pension (between ages 65 and 67, depending on the case). As a result, the employment rate for the 50-64 age group has already risen above that of the 1970s. Assuming the legal retirement age is extended again, the employment rate should increase in the years ahead, which should close the gap of nearly 5 points with the European average.
France: unemployment rate by ageA second, more recent change is the higher employment rate for the 15-24 age group. The employment rate for this age group fell continuously through the end of the 1990s due to the impact of more years of education, before levelling off at about 30% during the 2000s and 2010s. In 2021, it picked up sharply to 32.2%, bringing it in line with the European average. This rebound is mainly due to the surge in apprenticeship contracts, to 718,000 in 2021, which is nearly twice as many as in 2019 (with a job market insertion rate of 60% after 6 months according to the government).
France: monthly nominal wage average annual changeThis is directly reflected in the decline in the unemployment rate of the 15-24 age group, which dropped to 15.9% in 2021, the lowest level in nearly forty years. The reduction in youth unemployment largely contributed to the decline in the overall unemployment rate, which dropped to 7.4% in Q4 2021.
The situation in the 25-49 age group offers a more comparable figure over time because it is not affected by the impact of later career starts or earlier retirement ages on the job market. After losing nearly 3.5 percentage points between 2008 and 2016, the employment rate of this age group rebounded by 1.5 points in 5 years, to nearly 82% in 2021. This figure is still nearly 2 points lower than the one that prevailed in 2008, suggesting the existence of an available reserve of labour. The unemployment rate for the 25-49 age group dropped to 6.8% at year-end 2021, close to the Q2 2008 low of 6.4%.
WAGE GROWTH SHOULD ACCELERATE
France: difficulties of recruitment (% of respondents)Wage growth has been relatively moderate in recent years (chart 6) at a time when the unemployment rate was still high. The declining unemployment rate could push wage growth towards the point where it begins to accelerate. Major hiring difficulties have been reported in all sectors of the economy (chart 7).
In industry and the services sector, hiring difficulties were even higher than during the previous record of the year 2000. Construction has also reported major hiring difficulties, but not as many as in 2000.
More companies now anticipate a significant increase in wages (the threshold was not specified in the INSEE survey), notably in industry, where the proportion has been the highest since the year 2001. For the first time, the INSEE provided statistics for the construction and services sectors in January 2022, and a large share of companies confirmed this phenomenon (chart 8). In industry, the highest percentages were in agri-food and capital goods, while in services, it was highest in transport and accommodation & catering services.
France: corporates expecting in January 2022 a significant wage increase during the next 3 monthsInflation should lead to an increase in the minimum wage in 2022. The minimum wage was raised by 0.9% in January after an earlier increase of 2.2% in October 2021. The minimum wage is automatically raised when inflation exceeds 2% over the course of the year between two annual minimum wage increases. This was the case last October, and it is likely to occur again in May, for the same reasons and by quite a similar percentage. The government also announced that it would raise the civil servants’ wages before the summer.
In addition, collective bargaining agreements in various sectors have already resulted in significant wage increases, especially in food services. The average nominal growth rate for the monthly wage should accelerate in 2021, to 2.4% according to our estimates, the highest figure since 2008.
The French labour market has made some major improvements that were only partially and temporarily altered by the Covid-19 pandemic. Yet this momentum will have to be maintained to bring France’s jobless rate below 7%, which should foster sustainable wage growth.
