French anxiety over unemployment deepens

PARIS, March 30, 2006 (AFP) – French household confidence slipped in March, official data showed on Thursday and analysts said that a government plan to relax job security for young people had reignited consumers’ anxiety about unemployment.

The official statistics institute INSEE said that its confidence indicator had fallen to minus 26 points from minus 24 points in February, but one component of the index showed a surge of uncertainty about unemployment in the face of recent data showing some improvement.

The agency said that in contrast to data in preceding months, nearly all components of the indicator had shown a deterioration. Economists had expected the indicator to be steady at minus 24 points.

There had been an improvement in the previous three months from minus 33 in November to minus 30 in December, minus 27 in January and minus 24 in February.

The indicator includes confidence considerations such as the attitude of households towards living standards and this had “worsened quite sharply in March”, INSEE said.

The government says that the job-law plan is intended to relax tight constraints on how an employer can dismiss an employee, thereby reducing the risk of employing a young person in the first place.

The unemployment rate in France is about 9.6 percent and is particularly high among young people. A newspaper report suggested on Thursday that official unemployment data for February to be published on Friday would show that unemployment, which had edged up recently after several months of declines, would show an improvement.

But analysts said that the controversy over relaxation of job protection had highlighted uncertainty among consumers.

At finance house Xerfi, economist Nicolas Bouzou commented that the crisis over the jobs plan, known as the CPE, “has sharply affected household confidence in March” and particularly with regard to the outlook for unemployment.

He said: “Not only do the French have difficulty in seeing the effects of a reduction of unemployment in the statistics since the summer of 2005, but above all, and this is new, they do not see the problem being solved in the foreseeable future.”

He said: “Let’s be blunt: this survey raises the problem of the effect of the difficulties being experienced by the government and of the current tension on the economy.”

At Natexis Banques Populaires, economist Alexandre Bourgeois said: “There is no real surprise that French household confidence worsened in March. This setback can be explained by two main factors. On the one hand, a correction was expected after strong rises in recent months…But above all, the gloom in March can be explained by the opposition to the CPE.

“People, whether individually favourable or opposed to the measure, are reacting negatively as households to the current tension,” said Bourgeois.

“Meanhwile, anxiety about the trend of unemployment, which had fallen back sharply in recent months, is again rising. And how! Going from a figure of 12 to 41, the index for the outlook for the unemployment trend has shown its biggest rise since INSEE established a new measure in November 2003.”

At BNP Paribas, economist Mathieu Kaiser said that the dispute over the jobs plan had “weighed particularly” on the confidence indicator. “The new (CPE employment) contract, in raising questions about real changes to the ‘social model’, has cristalysed fears among French people about the outlook for their economic situation.”

He said that “the outlook for unemployment is at the heart of these fears.”

An economist at HSBC France, Nicolas Claquin warned that “there is a strong lilkihood that that consumption will slow down in the spring.”

Subject: French news