Marianne: The government is proud of the growth and decline in the unemployment rate. Bruno Le Mer greeted at the French Inter at the end of July. Extraordinary performance of the French economy “. You need to be satisfied with this, or the shortage and end of raw materials “” Whatever happens »» Will they announce a temporary liquidation?
Patrick Arthur: As always, there are plus and minus columns. The good news is that the company is in good shape, as opposed to what some people were afraid of. No one believes in the wave of bankruptcy, as the balance sheet has improved, the de-leveraging is so amazing, and the default rate remains very low. World trade is also recovering strongly, which is a great advantage for a country like France where exports account for 30% of gross domestic product (GDP).
On the downside, of course, you need to be aware of the shortage of raw materials. The price of raw materials should not be more focused than the difficulty of supply. They affect buildings, especially depending on their needs in the areas where wood and semiconductors are used. However, French industry accounts for only 10% of GDP.
But the biggest concern is still the difficulty of hiring. They are huge and relate to all sectors of activity. The lowest survey shows that the number of unfilled jobs is 300,000, but other estimates are more alert. In any case, it is difficult to assess what this represents growth. It can be interpreted that one and a half points of GDP are lacking because about one and a half points of employment are lacking.
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Finally, the use of savings is subject to great uncertainty. In France, savings of 160-170 billion euros have been accumulated. But the French do not currently use their savings. They especially like to invest it in housing. Savings ultimately do not support consumption; on the contrary, they push up stock market and real estate prices.
Where do these employment difficulties come from and could limit the decline in unemployment?
There are two causes for the difficulty of hiring. The skills needed for the health crisis to be no longer the same and the salaries offered are very low. Wage problems can definitely find a quick answer, but skill problems are not so easy to solve. Certainly it should take several years.
“In countries with few vaccinations, increased delta mutations should slow growth. »»
But unemployment is no longer the right indicator for measuring activity. When people leave the labor market, they are not necessarily unemployed. This is a problem seen in the United States, for example. According to the latest figures, 1.3 million people are currently partially unemployed in France. The question is how many of them will return to the labor market.
Is the recovery threatened by the resurgence of greater budgetary tightness in the European Union?
We know that the European Central Bank’s monetary policy will continue to expand. Officially, the uncontrollable part is the so-called structural deficit. In economics, the budget deficit is divided into a “circular” part and a “structural” part. When we return to full employment, the cyclical part disappears, but the structural part does not disappear because it has nothing to do with the economic situation. If you believe in the calculation by the Organization for Economic Co-operation and Development (OECD), there is a 9% budget deficit this year, 6.5% structural and 2.5% cyclical. Therefore, even if the crisis is completely overcome, France will still have a 6.5% budget deficit.
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This is not a short-term issue, and the issue can occur from 2023. At that point, it is unlikely that the public deficit could be maintained at 6.5%. Fiscal recovery will be one of the president-elect’s projects, especially since new spending is announced.
Where does France stand compared to its competitors?
Great care should be taken in the comparison. At the European level, tourism is an essential cause of slowing growth. Countries that are most dependent on this sector, such as Spain, Italy and Greece, are far more affected by the crisis. For example, we talked a lot about the difference in activity decline between Germany and France, but modifying the tourist data can explain almost all the differences.
In addition, countries that emerge from the hole, such as Spain, will see the growth curve rise much faster. This was especially observed in the second quarter, when Spain grew 2.7% in the second quarter and France grew 0.9%. On the contrary, in countries with few vaccinations, the rise of delta variants should slow growth.
Overall, Europe is not rebounding faster than the United States because of the huge fiscal policy of the United States. They also have a public deficit of 16 points in GDP this year. Europe should be about 7 points. On the other hand, I don’t know if we should criticize Europe for not doing enough. The United States is likely to face the major problem of shrinking its budget deficit in normalizing fiscal policy.
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