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Clouds behind the drop in unemployment, according to OFCE

The economic institute fears that the recovery will generate little job creation and that unemployment will rise to 8% from 2022.

The fall in unemployment and the strong job creations recorded since the beginning of the year will not continue at the same pace in 2022, forecasts the OFCE in a note published on Wednesday, raising concerns for the evolution of the labor market.

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In the wake of the latest forecast from INSEE, which expects the unemployment rate to decline to 7.6% in the third quarter, the French Observatory of Economic Conditions has noted a “spectacular” rebound in salaried employment since start of the year, with 438,000 jobs created in the first half of 2021.

Fewer job creations expected

A real paradox: “While activity was still below its pre-crisis level, employment increased”, underlines Eric Heyer, director of the analysis and forecasting department of the OFCE. After the fall of 263,000 jobs over the whole of 2020, according to figures from INSEE, the OFCE expects the creation of 322,000 jobs over the whole of 2021.

But in 2022, jobs will only increase by 111,000, forecasts the Observatory. “The expected return to a functioning of the economy close to normal (…) would slow down the creation of salaried jobs in the commercial branches”, he explains.

“The companies which should have laid off this year have not laid off”, thanks to state aid (partial activity, solidarity fund), no doubt counting on the recovery to come, also explained Eric Heyer. “This means that tomorrow’s growth will not be rich in jobs”, he warned.

Unemployment expected to rise

Or it would mean that “Productivity has become negative”, an unlikely hypothesis, but which would bode very badly for France’s potential growth in the future, he added. According to the OFCE, the unemployment rate should therefore reach 7.8% of the working population at the end of 2021 before rising to 8% in 2022. A forecast close to that formulated by the Banque de France (8.2% in 2022) .

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“The lifting of health measures and job creation would result in a gradual return to the labor market of people who fell into inactivity during the health crisis, ie +90,000 people”, justifies the OFCE.

 
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