France's unemployment rate fell to 9.8 percent in July from 9.9 percent in June as an economic recovery began generating the jobs the government needs to satisfy disgruntled voters. The Labour Ministry said on Tuesday the number of unemployed fell by 10,000 or 0.4 percent month-on-month to 2,675,000 in July, according to International Labour Organisation criteria. The fall was the first since February and bucked the forecasts of 20 economists polled by , all of whom predicted the jobless rate in the euro zone's second largest economy would be unchanged at 9.9 percent. "It's a positive surprise," said Nicolas Claquin, economist at CCF. "This is encouraging news for the second half of the year." The drop is good news for Prime Minister Jean-Pierre Raffarin's conservative government, punished by voters for its jobs record in regional elections in March and European Parliament elections in June. French unemployment still remains well above the euro zone's 9.0 percent. But the jobless readout follows other recent positive signs from the French economy.
Earlier this month, official figures showed surging investment powered the economy ahead in the second quarter, though a slowdown in consumer spending growth raised questions about the sustainability of the recovery. Economists had been looking for a fall in unemployment to bolster household confidence and stimulate future consumption -- the traditional driver of growth in France and considered vital to any substantial recovery. Deutsche Bank economist David Naude said that after strong growth in the first half, the economy would cool in the second half of the year. "We expect some downshifting in growth in the second half but that is because we are starting from a high base," he said. With economic recovery shaky in Germany, Europe's largest economy, France is a key engine of growth in the 12-nation euro zone. Raffarin has blamed France's 35-hour week for slowing growth. Last week, the government began talks with trade unions and employers on a possible change to the rules introduced by the previous Socialist administration. The debate about the 35-hour rules gathered steam in recent weeks after some French workers accepted longer working hours as a price for keeping their jobs. ///