French jobless rate up again

PAUL WALLACE

Economics Editor

The French unemployment rate rose unexpectedly from 11.4 to 11.5 per cent of the workforce in September. This latest blow to the economy came on a day in which the unions said they would stage a day of action on 14 November against government plans to cut welfare spending and Alain Juppe, the Prime Minister, said there would be a vote of confidence on those plans following a parliamentary debate in two weeks.

The jobless count increased by 28,200, taking the total to 2,952,100 - the second consecutive increase in unemployment after 10 months of decline and the largest for two years. The main increase was concentrated in the number of jobless men under the age of 25, up 13,000 to 267,200.

The rise in unemployment caused the franc to weaken by a centime from an early peak of DM3.4635 and rekindled scepticism in the markets about economic policy. Doubts are focused on the apparent clash between the objective of cutting unemployment on the one hand and slashing the budget deficit and sustaining the parity with the mark on the other.

At the end of last week, President Jacques Chirac said there was absolutely no reason to devalue the franc and committed himself to getting the budget deficit down. However, the rise in unemployment in September has raised concern about the viability of this commitment.

Neil MacKinnon, currency strategist at Citibank, said: "It highlights the inconsistency of objectives. His reassurance has bought time but it doesn't alter the fundamental problem that interest rates are too high at this stage of the economic cycle."