Wolf Richter www.testosteronepit.com [7] www.amazon.com/author/wolfrichter [8]
The daily drumbeat of layoff and plant-closure announcements in France has been riling up desperate workers who stand to lose their livelihood without much hope of finding a job elsewhere as unemployment has hit 10.5%. But now the government is worried about a “radicalization” of these angry workers. A major quandary: on one hand, the Socialists promised during the election to side with the workers; but on the other hand, they must somehow figure out how to create an environment where the private sector can survive.
And the private sector is gasping for air. The Services Purchasing Managers’ Index fell [9] to 43.6 in January, from 45.2 in December (below 50 = contraction), the fastest rate of contraction since March 2009. Particularly worrisome was the steep decline in employment. Manufacturing was even worse. Its index fell [10] to 42.9 in January. New orders plunged at the fastest rate since March 2009, with domestic demand the primary culprit. Employment skidded as excess capacity led companies to slash their headcount.
That these references to March 2009, the dark days of the financial crisis, keep cropping up in economic data is troubling. The report speaks of a “deepening malaise” and “a broad-based deterioration in the private sector” with “significant headwinds,” “accelerated job cutting,” and “heightened levels of uncertainty.” President François Hollande and his government should be in panic mode.
The private sector is anemic in France. Based on the 2013 budget, the central government will contribute 56.3% to the economy. The remaining 43.7% is spread over local and regional governments and finally the private sector—that is shriveling with the relentless de-industrialization of France.
Plant shut-downs and layoffs, or merely the announcement of these events often months or even years down the road, make bold headlines. Video clips of protests associated with them show up on TV, with angry men and women blocking the site. There are images of fires and mayhem. Managers are taken hostage. Politicians weigh in gravely and speak of “dialogue.” Layoffs and plant closures don’t go down smoothly in France.
A series of big-name companies, some of them part-owned by the state, has become part of the nightly layoff blues: Air France, steelmaker ArcelorMittal, Texas Instruments, Goodyear, refiner Petroplus, or automakers PSA PeugeotCitroën and Renault, whose unit sales in France had plunged 17% and 20% respectively last year. But it doesn’t stop there. Now home sales are grinding to a halt [read... The Next Shoe To Drop In France [11]].
The numbers are adding up: in 2012, according to Trendeo [12], which tracks the creation and destruction of jobs in France, 266 industrial plants were closed last year, a 42% jump from 2011! Since 2009, a total of 1,087 old factories were shuttered while only 703 new ones were brought to life, for a net loss of 384 plants. And these new factories have on average 8.5% fewer employees than factories that are being shut down.
Just how deeply the government is worried about the growing labor unrest emerged during an interview on BFMTV [13] on Tuesday. And not in a propitious location: Interior Minister Manuel Valls was discussing the hunt for Islamist terrorists in France—efforts that the government has redoubled since its military involvement in Mali—when suddenly the topic shifted to the government’s fear of “excesses and violence” during the next labor-related demonstrations.
“Social anger”—meaning, anger by unionized workers—“as a consequence of the financial and economic crisis, job insecurity, unemployment, and layoffs is here and has been rumbling for years,” admitted Valls. “But what we’re seeing today are less social movements but social implosions or explosions.”
Turns out, the government is already preparing for them. A memo to that effect, dated January 30, bubbled [14] to the surface. Sent to regional directors of the police intelligence service, it underlines “the risks of incidents” or possible “threats to production equipment in case of radicalization of the conflict.” To get a handle on the situation, the government has instructed its police intelligence apparatus to gather information on the movements and to follow teetering companies “very closely” in order to anticipate a possible “radicalization” of the labor unrest.
Valls confirmed the police surveillance. “You have to carefully analyze it,” he said about the social anger. And that was the job specifically of the intelligence services of the police, he added. Ever the likeable Socialist, he found the right words. “We have to try to understand the reasons that push men and women into desperation,” he said. “Men and women who are in the process of losing their jobs.”
What about vandalism and destruction of production equipment often associated with these movements? “We have to try to understand them, but we cannot permit them,” he said firmly, as the interview drifted to the next topic: rising violence and property crimes against individuals.
The heightened police presence at these sites during times of labor unrest, often in unmarked cars, has the unions worried. And Bernard Thibault, Secretary General of the CGT, warned that it would be seen as a “provocation.” And so the second largest economy of the Eurozone enters into a phase where fear of a labor revolt hangs over every economic decision the government makes.
The unemployment rate in particular has become treacherous. While all countries use inscrutable statistical systems to make unemployment look better, France also has an administrative tool: removing tens of thousands of people every month from the unemployment rolls for spurious reasons. Read.... “The Politics of Removal”: Dressing Up French Unemployment [15]