France’s structural unemployment rate could rise by 7 percentage points

Forecasts after the second lockdown show that from 2022, the permanent loss in the level of French GDP due to the COVID crisis relative to what it would have been without the crisis will be at least 7%. In the worst-case scenario for France’s labour market: The fiscal deficit cannot be increased to offset this loss of GDP; Companies are unable to fully restore their profitability; Wages are highly rigid; So the entire loss of GDP is concentrated in job losses. In this scenario, employment would fall by 12.5%, which would correspond to a fall in the payroll of 7 percentage points of GDP without a fall in the per capita wage, resulting in a rise in the structural unemployment rate of 7 percentage points.