Hollande had labelled 2013 the great battle for jobs and has repeatedly pledged to stem the rise in unemployment, which has reached record levels in recent months.
Despite economists, the IMF and the OECD doubting it can be done, Hollande is sticking to his guns.
As recently as Thursday when he opened the second 'social conference' on employment, Hollande reasserted his main objective was to stem the upward curve in the number of those without jobs in France.
"We can get there and we will get there," he said.
But on Friday the latest predictions from INSEE poured cold water on his vow.
The INSEE forecast, that the unemployment rate in mainland France would climb from 10.4 percent to 10.7 percent this year, is unwelcome news for the president
The agency had previously forecast the French economy would stagnate in 2013, while the government is still pencilling in 0.1 percent growth, but is now forecasting the economy will contract by 0.1 percent.
INSEE sees only limited improvement in French economic performance in the second half of this year.
After dropping by 0.2 percent in the first three months of 2013, the French economy should rebound by 0.2 percent in the second quarter, then stagnate in the third and expand by 0.1 percent in the fourth, said INSEE.
It sees external demand, particularly from Germany, helping pull up exports in the second half of this year.
Consumer spending, the traditional motor of the French economy, is likely to remain stuck in reverse. INSEE sees household purchasing power declining by 0.2 percent this year after dropping by 0.9 percent in 2012.
Furthermore, INSEE expects French consumers to stop dipping into their savings this year and start to put more money aside.