The current state of the UK economy is arguably as good as it has been for thirty years. Unemployment and inflation are each at their lowest levels for several years. A ‘misery’ index, derived simply by adding the unemployment and inflation rates is at its lowest point since the late 1960s.

We estimate that in the third quarter of 1999, output grew by 0.8 per cent. Within this total, household consumption is also forecast to have grown at 0.8 per cent, with higher growth of 1.4 per cent in government consumption. Fixed investment is forecast to have risen by 1.6 per cent and these, together with slightly less destocking than in the second quarter, contribute to a 1.4 per cent increase in domestic demand. This is expected to have been offset by a further negative contribution from net trade with strong growth in imports, especially services, offsetting the growth of exports.

The world economy appears to have embarked upon a cyclical upturn this year. Despite the widespread fears of a year ago, the downturn in global demand that began in the latter half of 1997 proved unusually mild and short-lived compared to others seen in the past three decades. Our latest projections indicate that global output growth is likely to have picked up to 2.9 per cent this year from 2.4 per cent in 1998, and may accelerate further to 3¼ per cent next year. In the OECD economies output growth has accelerated this year to 2.8 per cent, with a continued robust expansion in North America and a gradual stabilisation of the Japanese economy more than offsetting the relatively mild slowdown in the Euro Area and the UK. Elsewhere there has been a strong rebound in output in many of the Asian economies, and the impact of the currency crises in Brazil and Russia appears to have been absorbed more easily than had been expected at the time they occurred.

Economic growth remains robust in the United States. Output growth is projected to be around 4 per cent this year, for the third year in succession. IMF estimates suggest that the present expansion will become the longest on record if maintained until February of next year. Private sector demand is continuing to expand rapidly, underpinned by the sizable gains in equity markets over the past few years. Underlying price inflation has remained quiescent, helped by continued above-trend growth in productivity at a time when the unemployment rate has fallen to levels last seen in the 1960s. Even so, there are some emerging signs of overheating in the economy, with the current account deficit projected to rise to 4 per cent of GDP in the latter half of this year. Some favourable transitory factors which have helped contain inflationary pressures, such as the appreciation of the dollar and weak commodity prices, also now appear to have come to an end.

Economic growth in the EU slowed in the first half of 1999, with net trade in many countries having been adversely affected by the slowdown in global demand. Output was just 1.6 per cent above that in the same period in 1998, following growth of 2.7 per cent for 1998 as a whole. Growth was especially subdued in Germany, Italy, Belgium and Denmark. In contrast, growth in Sweden actually accelerated into 1999. A looser fiscal stance, with reductions in direct taxes, will help to keep Swedish domestic demand strong this year and next.

This article examines the scale and nature of the impact of 1990s migration on the populations of the eight largest conurbations in Britain, with particular reference to their labour markets. It shows that all these cities have been performing more strongly in demographic terms than in the 1980s, but London has seen by far the biggest upward shift in rate of population change. The change has come about principally due to increased net immigration from overseas, for though the urban exodus to the rest of the UK was at a low point at the beginning of the decade, it has subsequently returned to its long-term of average of 90–100,000 a year net loss. The article goes on to look — in as much detail as the available data allows — at the composition of both within-Britain and overseas migration, focusing especially on its industrial and occupational characteristics. The ‘net urban exodus’ is found to be skewed towards the more skilled and generally wealthier sections of the population, especially in the case of the provincial conurbations. Similarly, the net gains from mainstream international movements are biased towards more qualified people, notably students but also professional and managerial workers, helping to some extent to offset the effects of the urban exodus. There is, however, no detailed information about the asylum seekers and ‘visitor switchers’ that are now contributing a significant share of overall net immigration, especially for London, and it is also extremely difficult to gauge the effects of emigration on cities. Given the importance of migration for British cities in the 1990s and projected for the next two decades, there is an urgent need for the improvement of data sources on migrants' characteristics and for the more systematic analysis of the migration component of labour market change.

Housing policy has traditionally been highly specific, concentrating on providing decent affordable homes. Now, however, housing is being seen more as a major factor in locating wider problems of deprivation and social exclusion, as well as an important part in solutions, not only by increasing housing quality, but more widely through its impact on the neighbourhood, regeneration and even urban renaissance. The article reviews a range of research findings on the role that housing plays in concentrating problems of deprivation and decay, on the relationship between deprivation and housing conditions, on how the housing market operates in relation to successful area-based employment and regeneration policies, and the implications that these results have on how area-based policies should be evaluated.

The idea of industrial clusters forming the basis of regional economic growth has moved rapidly from academe to policy. This research, which forms part of the ESRC Cities: Cohesion and Competitiveness Programme, suggests that greater clarity is needed in defining and applying the concept in different regions. Several different types of clusters have already been identified. The precise basis of their relative success also seems to be different according to the degree of globalisation present and the position that regions occupy in their national hierarchies. In the case of London and the South East, the research shows that the internal characteristics of firms, the ‘pick and mix’ possibilities of a large agglomeration, and its position as an international trading gatweway, are critical for successful innovation in the region.

This article investigates the mechanisms by which the cities of the United States smooth out fluctuations in their income. Contributions for social security and government transfers (the government channel) take the bulk of smoothing (17 per cent), and intercity mobility ranks high: about 6 per cent of income shocks are smoothed via the choice of working in a city different from the place of residence. The empirical analysis also shows that the various channels of income smoothing operate differently according to the size and the degree of diversification of the city.