French non-farm payrolls grew at their slowest pace in a year in the third quarter, official data showed on Friday, in a sign that disappointing economic growth has dragged down hiring.
National statistics office INSEE said there was rise of 0.1 percent in the third quarter to 15,611,200. That followed a rise of 0.4 percent in the second quarter and was the slowest increase since a matching 0.1 percent in the third quarter last year.
"Apparently the slowdown in (economic) growth has had a strong impact on jobs," said Olivier Gasnier, economist at Societe Generale. "It's a bit worrying because all the indicators are not very good."
The economy failed to grow in the third quarter after expanding 1.2 percent in the previous three months of the year. Consumer spending has been the key pillar of the economy so job creation is crucial for economic growth.
Hiring in the manufacturing sector fell 0.6 percent - further evidence of the poor health of that part of the economy. French industry is struggling to stay competitive in the face of high social charges and rigid labour market rules.
Economists say the French economy is changing into one based on services rather than manufacturing but hiring in the services sector only increased 0.2 percent.
The report showed that 100,300 jobs have been created since the end of 2005, but only 14,500 of them in the latest quarter - evidence that overall job creation has slowed down.
The data is bad news for the ruling UMP party ahead of presidential and legislative elections next spring. It has made job creation a priority and Prime Minister Dominique de Villepin has trumpeted the steady fall in unemployment since he took office last spring.
The jobless rate dropped to 8.8 percent in September. But the differences between job creation and unemployment have led economists to question the two pieces of data.
"Slow growth makes it all the more intriguing to know how the unemployment rate has dropped to 8.8 percent at the end of the period," said Alexander Law, chief economist at Xerfi. "So what we're looking at is jobs that are not coming from the private sector."
Economists say that while some new jobs have been created due to economic growth, the decline in the unemployment rate is also due to baby boomer retirements, a tougher attitude towards unemployment benefits and public sector hiring, and new government-subsidised jobs. In June 2004, Labour Minister Jean-Louis Borloo announced a plan to improve "social cohesion" that included tax incentives for people to employ home helps with the aim of finding work for the long-term unemployed or those with few qualifications.
The government has also promised to boost purchasing power ahead of the elections.
Labour ministry data on Friday showed that base wages increased 0.8 percent in the third quarter, or 2.7 percent over the year. Purchasing power rose 0.9 percent in the third quarter or 1.4 percent over the year.
A separate report from the Bank of France on Friday showed the current account deficit shrank sharply in September to 2.1 billion euros compared with a revised 3.9 billion euros the previous month.
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