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Thursday, November 29, 2012 4:08 AM

French Unemployment Highest in 14 Years (And It's Going to Get Much Worse)

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According to Google translation from Le Monde, October marks the 18th consecutive month of rising unemployment. A second article from Le Monde discusses the Rise in Unemployment for October.

Unemployment has risen sharply again in October. According to statistics released Wednesday, November 27 by employment center and the Ministry of Labour, the number of applicants for employment who had no activity during the month (Class A) increased by 46,500 people, including DOM. In September, he had jumped nearly 47 000 people. Worse, counting the unemployed reduced activity (category B and C), the increase reached 73,600 people!

Such explosion had not been seen since March 2009. With 4,870,800 people registered at employment center, the number of job seekers Class A, B and C reached a level never seen before, as far back as statistics. For those in category A, the level was not as high for fourteen years, in May 1998. Since the accession of François Hollande at the Elysee Palace, very bad numbers keep on coming: nearly 230,000 people have registered at employment center and since May.

In detail, it is over 50 years old who suffer most from the increase in October, with nearly 2% increase in a month for this category. Rising long-term unemployment is still very high, with nearly 11.5% of registered job seekers concerned about one year.
French Unemployment vs. US Unemployment

Those outside France need a bit of perspective on various classes of unemployment cited above. This is my understanding, pieced together from two different sources.

  • Class A: Jobless people that have had no activity at all during the past month.
  • Class B: Jobless people having worked less than 78 hours during the past month ("short reduced activity")
  • Class C: Jobless people having worked more than 78 hours during the past month ("long reduced activity").
  • Class D: Looking for a job, but currently sick, or in internship, or in state-sponsored "professional development" courses, etc
  • Class E: Those in state-sponsored low-pay "community service" jobs

The official unemployment rate only comes out quarterly.

Reader Andrea offers these comments ...

For the sake of clarity, the official unemployement rate is given by the National Institut of Statistics (INSEE) each three months, not the ministry of labor class A-E activity. The distinction is similar to the weekly unemployment stats in the US vs. the official monthly unemployment and jobs report.

Moreover, and also similar to the US, many jobless people are not counted as unemployed because they have not been actively searching for a job.

Hollande Threatens to Nationalize Steel Plants Over Layoffs

Economic insanity in France continues at a steady pace. The latest bit of insanity is Hollande's Threat to Nationalize Steel-Maker Mittal.
French President Francois Hollande has met the owner of steel giant Arcelor Mittal, after saying he would discuss nationalising one of its plants.

Arcelor Mittal - which employs some 20,000 people across France - announced in October that it intended to shut down the Florange plant's already inactive furnaces, saying they were uncompetitive in such difficult trading times.

The company gave the government 60 days in which to find a buyer for the furnaces, a deadline which expires on Saturday.

The move provoked an angry reaction from the French government, which accused Arcelor Mittal of breaking a 2006 commitment to keep the blast furnaces running - a claim denied by the steel giant - and criticised the firm for refusing to sell off the site as a whole.

France's minister for industrial recovery, Arnaud Montebourg, accused the steelmaker on Monday of "lying" and "disrespecting" the country. He has since retracted a remark that Arcelor Mittal was no longer welcome in France.
Economic Ignorance Wins the Day

Pater Tenebrarun blasted the nationalization threat in his post Economic Ignorance Wins the Day Again in France.
France's minister of industrial insanity, Arnaud Montebourg (sometimes referred to as 'Mountebank' in these pages, for obvious reasons) once again proves that the leopard cannot change its spots. After wrangling incessantly with Arcelor-Mittal over its decision to close two long idled and evidently loss-making steel furnaces, he has now decided to openly declare war against the company.

Here is a brief summary of the economic facts of life for the hyperactive minister:

There is vast overcapacity for steel in the world. In China alone, some 200 million tons of production capacity appear to be the fruit of malinvested capital due to China's real estate and infrastructure bubble that has resulted from an unhealthy credit boom. This means that in China alone 200 million tons of production are likely loss making at present and will eventually have to be idled and/or liquidated.

It makes no sense to keep loss-making capacity going in Europe as well. That will only further misdirect scarce resources that are more urgently required elsewhere.

The very last thing the market economy needs in order to function smoothly is a 'minister of industrial renewal' (Montebourg's official job description), or any other type of  'economy minister'. The very best thing such ministers could do to help the economy would be to resign immediately.

Property Rights Thrown Under the Bus

Montebourg makes it sound as though Arcelor-Mittal, a private company, were deputized to the French government to help it fulfill whatever political aims it pursues – as though the government could simply draft private companies to aid it in attaining its socialist goals.

This case is going to have repercussions that go far beyond the fate of the loss-making furnaces and Mittal's continued presence in France. By threatening the company with nationalization if it doesn't comply with the government's wishes, Montebourg is signaling that his government has absolutely no respect for property rights.

If Mittal closes the two furnaces (which as noted above have been idled for many months already), then the people employed there will lose their jobs which is of course unfortunate. However, this is a typical case of the road to hell being paved with good intentions: by threatening the expropriation of Mittal, Montebourg ultimately risks far more jobs than merely those at the two furnaces.

There is a lesson that Mr. Montebourg has yet to absorb: No government can dispense with the laws of economics by decree. It might as well attempt to order the sun not to shine or issue an edict that gravity be abolished.
Expect Unemployment to Soar

Those looking for reasons French unemployment is going to soar, need only read Pater Tenebrarum's sterling rebuttal of France's plans to nationalize Mittal to save steel jobs when the world is awash in cheap steel.

What company wants to hire workers when they will be unable to fire them later if need be?

I talked about this many times before, but in case you missed it, please consider my June 8th article Hollande About to Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It"
Industry Minister Arnaud Montebourg is also planning legislation that would force companies to sell plants they want to get rid of at market prices to avoid closures and job losses.

Four Things, All of Them Bad

  1. Mass layoffs will occur before the law passes.
  2. Companies will move any jobs they can overseas.
  3. Ongoing, if it's difficult to fire people, companies will not hire them in the first place.
  4. Corporate profits will collapse along with the stock market should the need to fire people arise.

The proposal to force companies to sell plants rather than fire workers as outlined by Industry Minister Arnaud Montebourg and Labour Minister Michel Sapin is nothing short of economic insanity.
Europe Going Downhill Fast

Many people doubted Hollande would be foolish enough to carry out his job threats. They were wrong. In addition, Hollande massively hiked various taxes and also seeks a financial transaction tax.

Such actions prompted my June 16 report, "France Has At Most Three Months Before Markets Make Their Mark" .

No one should at all be surprised to learn in early November that France suffered the sharpest fall in service sector business activity for a year. For details, please see Dreadful Economic Data in Germany, Italy, Spain, France.

Things are going downhill fast in all of Europe and the bottom is nowhere near in sight.

Mike "Mish" Shedlock

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