100,000 subsidized jobs and Macron law to reduce France's unemployment rate

Since last autumn and the discussion with the EC to postpone the 3.0% public deficit target, the French government had committed to undertake some reforms in the labour market. The stakes are high because France is one of the few countries in the euro area where employment figures have still not improved and unemployment continues to increase (10.5% in April according to Eurostat), notes Societe Generale.

First, the government announced in early June that 100,000 state-subsidised jobs will be created in 2016 (from 450k in 2015 to 545k in 2016), costing €700m, mostly in the non-market sector (88%). This measure appears to be more of a tool to dampen the ongoing rise in unemployment. The programme should lead to the net creation of 80,000 jobs in 2016 in the public administration, education, health and human welfare sectors, and will have a meaningful impact on lowering unemployment, says Societe Generale. 

Secondly, the Macron Law and the Rebsamen Law (that aims to modernise the process of social dialogue) will include the main changes presented last week in the plan "Tout pour l'emploi dans les TME et les PME (such as the reform of the industrial tribunal, the easing of constraints on temporary contracts, the easing of the bargaining process for companies in difficulty). The Macron Law should be passed in the coming weeks, even though the government might have to use Article 49.3 - "the responsibility commitment" - a second time. 

Other new measures taken by decree will cost €1bn to the public finances in 2016, thus raising the risk that France will not meet its 3.0% of GDP public deficit target in 2017, suspects SocGen.