French Firms Cut Staff, Leave Posts Empty as Contraction Bites

France's private sector shrank again in October. The composite purchasing managers' index fell to 48.4 from 51.1 in September, well under the 50.5 economists had forecast. The country had returned to growth for a single month after months of contraction.

The mechanism of the job losses matters. French businesses cut staff for the sixth month running, the survey found, largely by leaving vacant positions unfilled and allowing temporary contracts to expire. Those who absorb the cut are the workers on short contracts and the people waiting to be hired. They don't appear in redundancy statistics.

The article doesn't say who holds those temporary contracts, and the survey doesn't break the figures down by origin or status. Across Europe's labour markets, insecure short-term work is where migrant workers are concentrated, which makes the sixth straight month of lapsed contracts a question the data leaves open. The base reporting records the policy of non-renewal, not its victims.

Confidence Collapses, Workers Wait

Firm confidence fell to its lowest level since the first Covid-19 lockdowns six years ago. Expectations for the next 12 months dropped to their lowest since April 2020, and the survey recorded negative business expectations for the first time in almost two years. Companies told the survey that customers were postponing projects and delaying spending decisions. New orders fell at their fastest pace since May, and export business declined for an eleventh consecutive month.

The services index fell to 48.4. Manufacturing slipped to 49.3, its lowest in 11 months.

Joe Hayes, senior principal economist at S&P Global Market Intelligence, tied the slump to politics and public finances. The sentiment reading, he said, "reflects firms' concerns about what is shaping up to be a highly uncertain 2027 Presidential Election, compounding pre-existing worries about France's fiscal situation." Rory Fennessy, senior economist at Oxford Economics, said: "Unsurprisingly, the volatile political situation and spike in government borrowing costs meant the downturn in the French composite PMI weighed on the overall picture."

The Bond Market Sets the Terms

The pressure on France is running through the debt markets. The 10-year government bond yield reached 5.14% on Thursday, its highest in 24 years, before easing to around 5.04% on Friday. The gap with German 10-year yields stood at 170 basis points, more than double the 78 basis points recorded in early August. France now pays around 45 basis points more than Italy to borrow for ten years.

The CAC 40 fell 0.7% on Friday morning to around 7,750 points, more than 11% below its 10 August closing high. Italy's FTSE MIB was broadly flat after Thursday's 2.5% decline and is also down more than 10% from its August peak. The euro traded near $1.12, more than 4% below its August high.

Rising interest rates make loans more expensive and can discourage investment, even without further ECB rate increases. The article names no one who decides how that pressure gets passed on. Where governments facing expensive borrowing look for savings, welfare budgets and the asylum and reception systems that depend on them are routinely among the first targets, but the base reporting doesn't say what France will cut or when.

The Eurozone Follows

The French deterioration pulled the wider eurozone down with it. The eurozone composite PMI fell to 51.9 in October from 53.1 in September, the weakest reading in four months, though still above the 50 line separating growth from contraction. Economists had expected 52.7.

What the figures don't capture is who carries the cost. Firms report postponed projects and frozen hiring. The people who clean, build, cook and care on temporary contracts that quietly expire are the ones the index measures only as a falling number. The next 12 months look bleaker to French employers than at any point since April 2020, and the 2027 Presidential Election, the event they cite as the source of their uncertainty, is still ahead.