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French employment prospects remain soft. Private sector payrolled employment was flat in Q1, according to preliminary estimates, while annual growth was -0.3% Y/Y (vs -0.1% prior). This softening in employment is consistent with recent falls in the EC’s Expected Employment Indicator, which has broadly been seen across industries.  

• Employment references from the April PMI round were also weak:
  • Services: “The latest survey data revealed there was a further trimming of employment across the French service sector in April. The nonreplacement of leavers was a common method through which workforce capacity was lowered, according to panel member reports. In some cases, firms cited recruitment difficulties. The pace at which jobs were shed was moderate overall”.
  • Manufacturing: “There was a further fall in employment, albeit one that was only marginal and the softest in almost two years”.
  • Construction: “Cutbacks to employment were once again made by French construction companies during the latest survey period, extending the current job shedding sequence to precisely a year. The extent to which workforce numbers dipped was moderate overall”.
• Preliminary Q1 wages rose 0.7% Q/Q, but annual growth eased to 2.1% Y/Y (vs 2.8% prior). The Indeed wage tracker has tracked at sub-2% levels through the year.
• This softening in compensation pressures is already being reflected in core inflation measures. In the April flash round, core HICP inflation was 1.7% Y/Y (vs 1.8% prior).

RXM5 129p, bought for 13 in 2.9k.

Spreads to Bunds are tighter in recent trade, without a clear headline catalyst.

• BTPs, OATs, SPGBs and & PGBs with a uniform ~1bp of tightening over the last 15 minutes or so.
• The move doesn’t line up with the latest round of German fiscal speculation and has actually deepened since Bunds bounced from lows.
• Demand at the latest OAT auction was solid but doesn’t seem strong enough to account for the tightening.