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Newsmakers

French President’s Pension Proposal Prompts Nationwide Strikes

Macron’s controversial strategy to stabilize the retirement plans'  finances threatens to paralyze the economy.

By Steffan Navedo-Perez

French President Emmanuel Macron’s plans for the country to adhere to a universal points-based pension system are provoking nationwide protests threatening to paralyze the country’s economy.

Macron’s proposal is to coordinate the country’s 42 distinct pension schemes into a unified points-based system that would reward employees for each day of labor, and those points would later be transferred into pension benefits when they retire.

His plan also aims to encourage employees to retire after the country’s official retirement age of 62, which is actually one of the lowest thresholds in the Organization for Economic Co-operation and Development (OECD) countries. To do this, the new system would lessen the benefits received by an individual if they retire before the age of 64. Those who leave the labor force after 64, would receive a benefits boost.

The current system, which includes unique provisions for certain professions, is under criticism for being complex and costly, and demands spending of about 14% of the country’s economic output, which is amongst the highest rates in the world. Only Greece and Italy top it in OECD countries, spending about 17% and 16%, respectively.

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It currently provides pension benefits based on a worker’s 25 highest-earning years for labor in the private sector, and for the last six months of work in the public sector.

Under a new system, unions are worried they will lose their say on pension benefits and contributions under a unified system, and they prefer the status quo because the current system makes up for the disparity between incomes and payments.

About seven out of10 French people say they will back the strike, threatening to pause many of the city’s critical operations for several days or more. Nurses and hospital staff, transportation operators, lawyers, police officers, postal workers, and energy staff are amongst those pledging to participate in the strike. Some trade unions asserted they will continue the strike until Macron abandons the proposal.

About 82% of drivers said they will go on strike, and at least 90% of regional trains will be cancelled. About half of the scheduled Eurostar trips between Paris and London have been cancelled. In Paris, 11 out of 16 metro lines will shut down completely.

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Home > News > Research > Sure, US Manufacturing Is in a Recession, but So What?
Research

Sure, US Manufacturing Is in a Recession, but So What?

Capital Group economist Franz, harking back to 2015-16's mini-recession, says industrials won’t bring down the rest of the economy.

By Larry Light

The US right now is going through a mini-recession, confined to industrials, that likely won’t spread into a full-blown economic slump, according to Capital Group’s US economist.

“We’re in a mini-cycle that affects industrials, not housing and retail” and other parts of the consumer economy, said Jared Franz, in a news conference. “The good news is that we will get out of it and then there will be tailwinds” for the nation’s overall economic output.

Franz pointed to the previous mini-recession, in 2015 and 2016, which was centered on the oil industry, a sector that had been keelhauled by a big drop in crude prices. This slide was largely restricted to oil companies and their suppliers, although their woes did result in slightly lowered earnings broadly. GDP growth decelerated sharply in the last half of 2015, and that year the S&P 500’s robust advance plummeted to a mere 1.4% gain.

But Franz noted that the mid-decade experience, with its rebound, likely would be replicated this time around with manufacturing. The solid consumer end of the economy (70% of GDP, versus 11% for industrial) is also helping.

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He said the Federal Reserve’s recent interest rate cuts were also helpful. That is a course that’s smoothed due to dropping inflation: to 1.6% from 1.9% a year ago, using the Fed’s favorite measure, the personal consumption expenditures price index.

Nonetheless, the 2015-16 dip had two powerful propellants to restore economic expansion that are unlikely to recur: The Chinese government stimulated its sliding economy with fiscal outlays, and Washington lowered taxes, and hiked federal spending. “We won’t get that China or federal stimulus” this time, he said.

US factory activity contracted for the fourth straight month in November, according to the Institute for Supply Management. In October, a Wall Street Journal poll of economists found that two-thirds thought the industrial sector had entered into a recession. Culprits they cited were subdued global growth, the US-China trade war, and domestic political turmoil.  

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