Unemployment will rise, growth will take off little: INSEE’s gloomy forecasts for the start of 2025

With unemployment on the rise and growth at half mast, the picture drawn is far from ideal. The rate of unemployed people in France should rise from 7.4% currently to 7.6% of the active population by mid-2025, the National Institute of Statistics reported on Tuesday in its economic report. As for French GDP growth, it should not exceed 0.2% in the first and second quarters of 2025. “The signals emerging from surveys of households and businesses paint a gloomy landscape,” said Dorian Roucher, the head of the economic department.

On the unemployment side, “in the fourth quarter of 2024 and the first half of 2025, mainly as a result of the pension reform, the active population would continue to increase”, indicated INSEE in its economic note. INSEE recalls that the employment rate (69.1%) continued to increase, reaching its highest level in the third quarter of 2024 since the institute began measuring it in 1975.

Not enough jobs created to “absorb the increase” in assets

But this does not prevent the deterioration of the economic situation from pushing unemployment upwards at the same time. “By mid-2025, the private sector would begin to destroy salaried positions, particularly apprentices, and employment should slow down significantly in the public sector,” INSEE anticipates. “In total, the French economy would create 40,000 jobs in three quarters, mainly non-salaried. This rate would be insufficient to absorb the increase in the active population,” continues the institute.

Job creations are linked “to the dynamics of business creations, mainly micro-enterprises”, Dorian Roucher said at a press conference, adding that these non-salaried job creations were “a specificity of the French economy. INSEE specifies that its forecasts do not include the “uncertain” effects on the unemployment rate of the RSA reform, the generalization of which from next January 1 will lead to the automatic registration of 1.2 million additional beneficiaries. France Travail.

The institute “assumed the renewal in 2025 of taxes according to the scales in force on the revenue side, and of services voted in 2024 on the expenditure side”, while amendments to index the income tax scale on inflation were deemed inadmissible by the president of the Palais-Bourbon, Yaël Braun-Pivet, as part of the examination of this emergency budget. Its economic report therefore does not take into consideration the effects on employment of any budgetary restrictions that could be taken.

A dreaded brake on public spending

As for French GDP growth, it should not exceed 0.2% in the first and second quarters of 2025, according to the institute, which continues to forecast zero in the fourth quarter of this year, for a total of 1.1 % in 2024. The quarterly note, entitled “activity suspended from a renewed confidence”, thus foresees a “growth achievement”, that is to say what the annual growth would be if the GDP no longer evolved at all in the end year, by 0.5% at the end of June.

Dorian Roucher admitted that arithmetically, it would take “quite significant” growth, “high for the French economy”, of 0.8% in each of the last two quarters, to achieve the growth forecast of 1 .1% again this year, a figure put forward so far by the executive. The economist seemed to doubt such a possibility, unless “the positive hazards manifest themselves immediately, that is to say that confidence returns quickly, that households start to consume and that the factors which are weighing down investment are lifting up a little.”

INSEE currently believes that, by mid-2025, “the two engines of 2024 would shut down”. On the one hand, foreign trade, vigorous in 2024, would “normalize” downwards. Furthermore, the identical renewal of the previous year’s budget would result in a brake on public spending. The institute’s scenario is based on this hypothesis, as a new budget has not yet been put in place following the censorship of the Barnier government.

After increasing by 2% in 2024, this public spending would only increase by 0.1% in each of the first two quarters of 2025. Private demand would then “weakly take over”: investment would “remain constrained” by uncertainty, and only the consumer would carry some of the growth, according to this note. Investments should therefore remain almost stable at the start of the year, while household consumption, up 0.9% in 2024, should increase by a further modest 0.1% then 0.3% at the start of 2025.