French households are optimistic on jobs

The momentum of the French labor market is dramatically changing.
The households’ confidence index for May was published by INSEE this morning. It was at its highest since October 2007. The crisis is almost over as confidence is back to its pre-crisis level. The most important point is the dramatic improvement of the labor market component of this index.
Households’ perception of the unemployment dynamics is at its lowest since June 2008. Again it’s back to its pre-crisis level. This is a radical change. Households are more optimistic on the future, for them individually and for all the French people.

Earlier this week, statistics on unemployment were published by the ministry of labor. The number of registered at the French Agency, Pôle Emploi, trends downward for the first time. This statistics includes people who look for a job even if they are able to work for a limited time during the month. This is a real improvement. We saw a change in trend in spring 2015 and now it’s a slowdown.
The labor market dynamics is changing. People’s perception of its momentum is now more positive and official statistics show a real improvement.
The current context in France is nevertheless very different when we see a lot of strikes on gasoline supply and in different sectors. This reflects  a real balance of strength between the government and trade unions. The main reason for these demonstrations is the fact that labor negotiations, in a new law on the labor market, could now take place at companies level and no more at a sectoral level. This could undermine trade unions’ power in the negotiation.

There is a clear opposition between the optimism seen in the different statistics and the social unrest. If this social unrest is not too long, the impact on economic activity will not be significant.
But we don’t know yet how the government and trade Unions will discuss (it hasn’t started). The risk is to lose credibility for the first who will accept a deal. But a deal is necessary to maintain household’ optimism.

The global outlook in 8 graphs

In April, there are still a lot of questions related to the strength of the global economic activity for the coming months.
Companies’ surveys in April from ISM and Markit do not show an improvement in the manufacturing sector. Nevertheless the momentum is stronger in the non manufacturing sector. The first point is worrisome as a slow dynamics in the manufacturing sector will lead to a poor performance in world trade. We cannot expect an impulse from this sector and therefore no spillover can be anticipated to the non manufacturing sector. The main source of improvement in the economic momentum always comes from a change in the manufacturing sector profile. This is not the case yet. Continue reading