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PARIS — The French unemployment rate ended last year at its highest level since 1999, the national statistics institute reported Thursday, underscoring the urgency of President Francois Hollande’s task as he pushes for a far-reaching labor law overhaul intended to encourage new hiring.

The jobless rate rose to 10.6 percent in the October-December period, up 0.4 percentage point from the previous quarter, the statistics agency, INSEE, said, as gross domestic product shrank 0.3 percent amid government austerity measures. Almost 26 percent of young people were classified as jobless, INSEE said.

The unemployment rate has risen for six consecutive quarters, putting pressure on public finances and turning an uncomfortable spotlight on the Socialist president’s campaign promise to get the labor market moving in the right direction by the end of this year.

The answer, the government hopes, lies in a “flexicurity” agreement signed Jan. 11 by employers and unions that would give companies more freedom to hire and fire. On Wednesday, Prime Minister Jean-Marc Ayrault’s cabinet endorsed the deal and said it would present it to Parliament for approval this spring.

“This is a win-win deal for businesses that get into trouble, that have to reorganize,” Ayrault said, adding that the accord gives companies a tool other than layoffs for addressing their problems.

The agreement, which draws on ideas pioneered in Denmark, a country with one of the world’s most flexible labor markets, would probably not have been possible a generation ago, or even under Hollande’s predecessor, Nicolas Sarkozy. But several years of crisis and economic stagnation have led to an acknowledgement across most of the political spectrum that relatively high labor costs are making it harder for French workers to compete when jobs can easily be outsourced to low-wage countries. Those concerns have been magnified by a recent diatribe against French workers by an U.S. tire company executive, Maurice Taylor Jr., who said he would be “stupid” to invest in a French factory, and a call for a “competitiveness shock” from a former top aerospace executive, Louis Gallois.

Stefano Scarpetta, head of the labor division at the Organization for Economic Cooperation and Development, said the French appeared to be learning from the example set by Germany, where companies faced with a less rigid labor code have better weathered the recent crises and where unemployment, at 5.3 percent, is half the level in France.