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Working on a public holiday?

The trade unions kept a somewhat low profile Wednesday, 1 May, angry that they weren't able to rally more activists to the streets of France’s major cities.

And yet, the subject was work and it was serious, continuing to fuel comments from observers and financial analysts. 

Work, jobs and, naturally, purchasing power is “THE SUBJECT”, as a Wall Street Journal reporter explained at the beginning of the week. And in the United States, the news is rather good. As the daily Le Figaro reported in its Thursday edition, job creation in the US private sector in April reached its highest level since July. Donald Trump promised to “Make America Great Again” during the American Presidential election. To make his slogan a reality, he was quick on Tuesday to put pressure on the American central bank, an institution known for its independence. Trump tweeted his demand for lower interest rates to make the economy “go up like a rocket” and accused the Fed of having incessantly raised interest rates and holding the economy back. And, Le Figaro added, “On Wednesday, as expected, the Fed ignored these orders. Faced with robust growth, and despite weak inflation below its target 2%, the Fed left its rates unchanged, as expected by most observers. The decline in inflation should only be temporary, whereas the strong economic growth and jobs market, like the risks to financial stability of an overly accommodative monetary policy, do not call for a reduction in US interest rates, said Valentin Bissat, Economist/Strategist for the Swiss bank Mirabaud.”


Following the third meeting of the monetary policy committee since the beginning of the year, the Fed unanimously held its overnight rate in the 2.25% to 2.50% target range, repeating that it would be patient in deciding future adjustments. “American monetary policy cannot be set by a tweet,” commented Le Figaro. Activity in the manufacturing sector did slow more than expected in April, to its weakest pace since Donald Trump’s election, according to the ISM manufacturing index, and inflation is weak.


But the American economy is not that bad, emphasized Rabobank. “If you compare the one-year growth rate, the 1.2% in the euro zone is significantly below the 3.2% announced last week for the United States.” On the stock market, the S&P 500 gained 3.9% in April, making these last four months its strongest increase in nearly nine years. Lastly, although the figure is inflated by technical factors, job creation in the US private sector reached its highest level since July (up by 275,000), according to the ADP survey. “The reduction in interest rates can wait! ”


However, the Paris stock market retreated at opening on Thursday morning (-0.61%), cooled like Wall Street by the Fed Chairman’s remarks about inflation, which are limiting expectations for lower short-term rates.

The CAC 40 index lost 34.15 points, closing at 5,552.36. Tuesday, before the 1 May break, it closed up slightly by 0.10% “European indices, like the American markets before them, are ‘somewhat disturbed by the ambiguous message’ of Jerome Powell, the American Fed Chairman and his ‘lack of compassion’ faced with the risks of an economic slowdown, stressed the Mirabaud Securities professionals”.


Explanations quickly followed. “The Fed dampened expectations, forcing the markets to re-evaluate the possibility of monetary easing”, said Jasper Lawler of London Capital Group.

On the subject of trade, China and the United States in Beijing on Wednesday completed a new round of negotiations on their trade disputes, which were called “fruitful” by the Americans, ahead of new discussions in Washington next week.


In France, it is exemption for overtime work that is sparking debate. As stressed by the trade press , “they have to meet the demands of the yellow vests”. Exemption from taxes and charges, which became effective 1 January, were announced along with other urgent measures on 10 December by Emmanuel Macron. According to Matignon, the Prime Minister’s office, this exemption from taxes and social charges on overtime will generate €3 billion in purchasing power this year.

Matignon consequently announced that 6.8 million private sector employees worked on average 11 hours of overtime per month in the third quarter 2019. This represents “a gain of €670 million in purchasing power” for them: €400 million from social charges and €270 million from income taxes. As a result, Matignon claimed that an employee paid €1,500 net per month and working 11 hours overtime per month would earn around €600 in additional purchasing power, or €50 per month”.


Les Echos concluded in its Thursday edition: “The French economy should have been able to withstand the headwinds that are buffeting the global economy, thanks to its domestic demand. These hopes were disappointed for the first quarter. Economic growth in France increased 0.3% in the first three months of the year”. French households may be more likely to save in the future. To just invest the fruits of their labour.

Christian Moguérou

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