Unemployment: an ambiguous fall, but an unambiguous rise in long-term jobless

Analysis and Forecasting Department (France team)

The unemployment figures for the month of January 2016 published by France’s Pôle Emploi job centre show a fall of 27,900 in the number of job seekers who are not working (category A), which follows an increase recorded in the month of December (+15,800). While this fall might seem encouraging (a decline of this magnitude has not been seen since 2007), it must be qualified. First, recent changes in administrative practices made by Pôle Emploi [1] have resulted in an abnormal increase in exits from the jobless rolls due to failures to update (239,000, against a monthly average of 207,000 in 2015). Second, the high volatility of the monthly figures in recent months is a sign of a labour market in which job creation is insufficient to reduce unemployment on a sustainable basis. Continue reading “Unemployment: an ambiguous fall, but an unambiguous rise in long-term jobless”

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The labour market: is the unemployment rate a good indicator?

By Bruno Ducoudré and Pierre Madec

Considering the euro zone on the one hand and the United States and the United Kingdom on the other, changes in unemployment rates are a reflection of the divergences in growth highlighted in our last fiscal year forecast. While between 2008 and late 2010, trends in unemployment reflected the sharp deterioration in growth and did not differ much between the euro zone, the UK and the USA, differences began to emerge from 2011. In the United Kingdom and the United States, unemployment has been falling since 2011, whereas, after a brief respite, a second phase of rising rates took place in most euro zone countries (Table 1). It was only more recently that the unemployment rate has really begun to fall in Europe (late 2013 in Spain and early 2015 in France and Italy). Overall, for the period 2011-2015 the rate rose overall (+2.7 points) in Spain. In Italy, this deterioration in the labour market even worsened (+4.5 points in this period, against +2.2 points from early 2007 to late 2010). France, though to a lesser extent, was not spared.

An analysis of the unemployment rate does not however convey the full dynamics at work in the labour market (Tables 2 and 3), in particular in terms of underemployment. Thus during the crisis most European countries reduced the effective working time [1] to a greater or lesser degree, through policies on partial unemployment, the reduction of overtime, or the use of working-time accounts, but also through the expansion of part-time work (especially in Italy and Spain), including on an involuntary basis. Conversely, the favourable trend in the US labour market is partly due to a significant decline in the participation rate, which stood in the first quarter of 2015 at 62.8%, 3.3 points lower than eight years ago.

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In order to measure the impact of these adjustments (working time and participation rate) on unemployment, it is possible, subject to a number of assumptions [2], to calculate the unemployment rate at constant employment and control for these adjustments. Except for the United States, where the participation rate has fallen sharply since 2007, all the countries studied experienced an increase in their labour force (employed + unemployed) that was greater than in the general population; in many countries this was due to pension reforms. Mechanically, in the absence of job creation, the impact of this demographic trend is to push up the unemployment rate in the countries concerned. For instance, if the participation rate had remained at its 2007 level, the unemployment rate would be lower by 1.6 points in France and 1.1 points in Italy (Table 4). Conversely, without the significant contraction in the US labour force, the unemployment rate would have been more than 3 points higher than what was seen in 2015. Also note that since the crisis Germany has experienced a significant drop in unemployment (-4.2 points) even though its participation rate grew by 2.2 points. Assuming an unchanged participation rate, Germany’s unemployment rate would be 3.1% (Figure 1).

In terms of working time, the lessons seem quite different. It thus appears that if working time had been maintained in all the countries at its pre-crisis level, the unemployment rate would have been more than 3 points higher in Germany and Italy and about 1 point higher in France and Spain, countries in which working time decreased sharply only from 2011. In the US and UK, the situation is very different: working time has changed only very little since the crisis. By controlling for working time, the unemployment rate thus changes along the lines observed in the two countries.

The tendency for working time to fall is a familiar story. Since the late 1990s, all the countries studied have greatly reduced their working hours. In Germany, between 1998 and 2008, the reduction was on average 0.6% per quarter. In France, the transition to the 35-hour week caused a similar reduction over the period. In Italy, the United Kingdom and the United States, the downward shifts in average working hours were respectively -0.3%, -0.4% and -0.3% per quarter. In total, between 1998 and 2008, working time fell by 6% in Germany and France, 4% in Italy, 3% in the United Kingdom and the United States and 2% in Spain, which was de facto the only country that during the crisis intensified the decline in working time that started in the late 1990s.

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[1] Working time is understood here as the total number of hours worked by employees and the self-employed (i.e. total employment).

[2] It is assumed that, at constant use, a one-point increase in the participation rate leads to an increase in the unemployment rate. Employment and working time are not considered here in full-time equivalents. Finally, neither the “halo of unemployment” nor any possible “bending effects” are taken into account.

 

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Unemployment figures: the chill returns in April

By Analysis and Forecasting Department (OFCE-DAP)

While the slowing increase in the number of job seekers registered with France’s Pôle Emploi unemployment agency in the first quarter of 2015 could be seen as the premise of the long-awaited downturn in the unemployment curve, the figures released today once again cast doubt on this prospect, at least in the short term. The registration of 26,200 additional people in category A at the agency in April brings the increase in job seekers back to a high rate, well above the average over the last two years (13,400 per month) and far from the virtual stability seen in the first quarter (+3,000 per month).

While the publication of strong figures for first-quarter GDP growth (+ 0.6%) reaffirmed the prospect of a recovery, the jobless numbers are disappointing. Don’t forget, however, that employment does not immediately respond to a pick-up in activity; it will take time to reap the benefits for the labour market of the good growth experienced at the year’s beginning, when the recovery has proven to be strong, pushing employers to recruit. For now, companies are still digesting the overstaffing inherited from the period of very low growth between 2011 and 2014. The fall in unemployment that can be foreseen with the recovery will not take place until the second half of 2015. But the acceleration of job centre registrations in April sends a contrary signal. Continue reading “Unemployment figures: the chill returns in April”

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On the difficulty of carrying out structural reforms in a period of high unemployment

By Sabine Le Bayon, Mathieu Plane, Christine Rifflart and Raul Sampognaro

Structural reforms aimed at developing a more flexible labour market are often attributed all the virtues of fighting against mass unemployment and limiting the segmentation of the labour market between “insiders” on stable contracts  and “outsiders” who are unemployed or on precarious contracts. When the economy is growing, these measures can facilitate job creation for the benefit of the outsiders, but the results are likely to be more uncertain in a context of mass unemployment and sluggish growth. Structural reforms can indeed reduce the labour market duality arising from regulatory measures but they cannot combat the duality of the labour market inherent in human capital, which is exacerbated during periods of mass unemployment: given the same qualifications it is experience that makes the difference, and given equal experience it is qualifications that make the difference. High unemployment therefore strengthens the phenomenon of “queuing” to access more stable jobs. Structural reforms aimed at streamlining the labour market will thus primarily affect employees who have less qualifications and experience without however enabling outsiders to gain access to more stable employment. This means that inequality between workers is likely to rise, with no positive impact on employment due to the sluggishness of the economy. Only macroeconomic management that takes on board the goal of returning to full employment could lead to successful structural reform. Continue reading “On the difficulty of carrying out structural reforms in a period of high unemployment”

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What’s masked by the fall in US unemployment rates

By Christine Rifflart

Despite the further decline in the US unemployment rate in December, data from the Bureau of Labor Statistics released last week confirms paradoxically that the American labour market is in poor health. The US unemployment rate fell by 0.3 percentage point from November (-1.2 points from December 2012) to end the year at 6.7%. The rate has fallen 3.3 percentage points from a record high in October 2009, and is coming closer and closer to the non-accelerating inflation rate of unemployment (NAIRU), which since 2010 has been set by the OECD at 6.1%. However, these results do not at all reflect a rebound in employment, but instead mask a further deterioration in the economic situation. Continue reading “What’s masked by the fall in US unemployment rates”

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France: will the war of the 3% take place?

By Eric Heyer

This text summarizes the OFCE’s October 2012 forecasts for the French economy.

The French economy is expected to see average annual growth of 0.1% in 2012 and 0.0% in 2013. This performance is particularly poor and far from the path that an economy recovering from a crisis would normally experience. Continue reading “France: will the war of the 3% take place?”

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