why the economy continues to create jobs

As we know, economics is a subject made up of multiple paradoxes. It is an understatement to say that the period is full of them. While inflation is beating historic records, the war in Ukraine is not about to end, and the recession is looming, employment is holding up surprisingly well in Europe, and more particularly in France.

According to INSEE figures published on Tuesday, November 15, the unemployment rate even fell slightly in the third quarter to 7.3% of the active population, and 17,000 fewer unemployed than in the previous quarter. As for the employment rate of people of working age, it has never been so high since 1975, at 66.3%.

Job creation despite the slowdown in activity

So how can this astonishing resilience of employment in France be explained, and should we necessarily be happy about it? “In reality, the enigma is not that of the unemployment rate, which remains relatively high compared to the rest of Europe, but above all affects job creation, which continues to progress despite the slowdown in the economy. ‘economy “, estimates the economist of the OFCE Éric Heyer. Since the start of the year, INSEE has recorded 270,000 net job creations, up another 0.4% in the third quarter.

Admittedly, it should still be remembered, the health crisis and the billions of euros poured into the economy have permanently blurred the cards, making the analysis of the employment situation complicated. According to economists, this would still be artificially maintained by state aid, explaining the historic low number of bankruptcies over the past three years.

“If the State had not repeatedly postponed the deadlines for reimbursing the PGE (loans guaranteed by the State, editor’s note), we would certainly have much higher default levels, with much more job destruction,” assures Eric Heyer.

Labor retention

Nevertheless, the situation of French companies is paradoxical. While the recession, at least in Europe, is now no longer in doubt, the latter show order books full to bursting, and complain more of their recruitment and supply difficulties than of a drop in demand. According to a recent Pôle Emploi survey, 58% of recruitments would still be considered difficult today.

“As a result, even if the phenomenon is difficult to assess, it is estimated that part of the increase in employment is due to what is called labor retention: for fear of not being able to provide their customers in the future and not being able to hire, companies prefer to keep their workforce, even if this weighs on their profitability”, explains Yves Jauneau, head of the synthesis and economic situation of the labor market division of INSEE.

Business productivity losses

What explains in any case the decline in the productivity of companies since the start of the health crisis. According to INSEE, this has fallen by two points since the end of 2019. “It is indeed the counterpart of a rise in the employment rate without growth, emphasizes Eric Heyer. In the short term, this is excellent news. In the long term, this is much less obvious, as it risks translating either into lower real wages or lower margins for companies, which in turn can lead to bankruptcies and layoffs. »

Other reasons are also put forward to explain this drop in productivity, including the increase in the use of learning, or the increase in the rate of absenteeism since the Covid. “It is also interesting to note that this increase in absenteeism also contributes to labor retention: faced with the multiplication of work stoppages, certain sectors such as construction, transport or catering prefer to constitute reserves “, adds Eric Heyer.

A labor market disrupted by the health crisis

Since Covid, the labor market has undergone multiple upheavals, the effects of which on long-term productivity are still difficult to measure. Telework, demotivation of employees, or even reduction of the share of concealed work (to be able to benefit from state aid)… In the future, the question is also whether these developments will continue or not.

For the most optimistic, the drop in productivity could also be the sign of a rebalancing of the distribution of value within companies. In other words, one could imagine that the health crisis led companies to cut back a little more on their margins, and create more jobs. But that will not be known for several years.

Source : BBN NEWS

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