Pre-print, Working paper: We here ask whether French local authorities respond to depressed local labour markets by increasing employment in State-owned hospitals. We use 2006-2010 panel data to examine within-hospital employment changes: higher local unemployment is associated with greater employment in State-owned hospitals, but not for any other hospital type. Our data cover a reimbursement reform introducing competition between hospitals. This reform reduced public-hospital employment, but had no overall effect on the relationship between public-hospital employment and local unemployment. Further analysis shows that this continuing relationship is only found in higher unemployment areas, where public-hospital employment remained counter-cyclical.