French unemployment at a 25 year low

Sarkozy's government was elected with a reform mandate

Unemployment in France has reached a 25-year low - dropping 0.9% in May to 2.2 million, the government said. Read original article.

• Insee

The decline takes the jobless rate to 8.1%, still giving France one of the worst unemployment records in Europe.

But the slight improvement will give new President Nicolas Sarkozy a welcome boost as he prepares to unveil laws aimed at relaxing the labour market.

His pledges of economic reform have already lifted consumer morale, state statistics agency Insee has said.

Insee's gauge of current consumer sentiment climbed to minus 12 in June from minus 14 the previous month, beating market expectations, as households felt more comfortable about their current standards of living.

But the measure of future consumer confidence declined, perhaps a result of indications that VAT could be increased, say observers.

New jobs

We have a very, very encouraging number of new jobs in the commercial sector in the first quarter Economy Minister Christine Lagarde France's unhappy workplaces

Many believe that consumer confidence is likely to improve on the back of an encouraging labour outlook, which has been attributed to the election of Nicolas Sarkozy.

"It is obviously a positive Sarkozy effect, but can it last?", questioned Audrey Childe-Freeman, an economist at CIBC. "We believe so."

"The growth outlook for the French economy is improving in a context where unemployment is falling, business confidence is fairly healthy and the global environment is favourable," he added.

The newly appointed Economy Minister Christine Lagarde pointed to a "very, very encouraging number of new jobs in the commercial sector in the first quarter" and expected this trend to continue as the year progressed.

This could underpin economic expansion later in the year, after a dull start, with growth at 0.5% in the first quarter.

Insee expects economic growth for the year to reach 2.1%, still lower than the eurozone average for the second year in a row.

However, the French economy will be boosted by the strong performance of the eurozone, led by Germany, which is expected to recover strongly this year.