The growth of output is continuing in the first half of the year at a moderate and steady pace. The preliminary estimate for gross domestic product in the first quarter shows an increase of 0.7 per cent, which is 2.6 per cent on a year earlier (see Chart 1). If oil and gas are excluded the increase is just 2.0 per cent. This rate of growth is not quite in line with the long-term trend, suggesting that little if any of the slack created by the recession has been taken up. The CBI survey of manufacturing and some labour market indicators however would seem to be consistent with a rather more rapid recovery and it is possible that the recent figures for GDP will eventually be revised up.

Growth in the OECD as a whole has been well below trend in the last three years, and the EU as a whole appears to have experienced a fall in output in 1993. Prospects for 1994 look better, and we are forecasting OECD growth of over 2 per cent in 1994, with only slightly slower growth in the EU as a whole. Inflation has been falling in the EU since 1991, and because these economies are likely to be operating below capacity we are projecting that it will continue to fall, albeit slowly, for the next two years. Inflation in the US will probably reach the end of four years of decline in 1994, and we are forecasting that it will edge up only slowly over the next few years. The Federal Reserve has responded to the prospect of higher inflation, and short rates have been pushed up. Long rates, both in the US and elsewhere have, partly as a consequence, risen sharply in the last few months.

In recent years, international product markets have become more open as a consequence of a reduction in local trade barriers such as the completion of the single market in Europe and the North American Free Trade Agreement and through a reduction in worldwide trade barriers through GATT. The resulting increase in the competitiveness of global product markets has been intensified by the emergence of competition from the former Communist countries in Europe and rapidly developing countries from South East Asia.

In this note, I present and discuss comparisons of productivity and unit labour costs between the UK and a number of industrial countries. Initially results are discussed for the UK and its four largest industrial competitors: France, Germany, Japan and the United States, collectively the G5 countries. Later the comparisons are extended to eight other countries. Both growth rates and levels of productivity and unit labour costs are considered, comparisons of levels being far more difficult to make.

In recent years continued disparities between countries in economic performance combined with the rapid pace of technological change have led to growing interest in comparisons of ‘national systems of innovation’. The development of this concept reflects increased awareness of both the cumulative, informal nature of much innovative activity—especially the interaction between producers and prospective users of new products—and the ways in which national-institutional structures condition the decisions taken by key actors in the innovative process such as enterprises, universities, and individual engineers, scientists and other members of the labour force (Lundvall, 1988; Freeman, 1988; Westney, 1993; Soskice, 1993).

The labour supply of teenagers in full-time education has been largely neglected in analyses both of the UK youth labour market and of educational decisions and policy. The teenage years have been seen as when a single transition takes place from full-time education to employment (or unemployment), in the form of a ‘school-leaving’ decision. The possibility that the transition from school to work may be more gradual, and involve a phase when school and work overlap, has been less discussed. Yet there are indications that the part-time work of teenagers in full-time education is a far from trivial aspect of teenage labour supply; an analysis of data from the Labour Force Survey for autumn 1992 (Sly, 1993) found that about one third of 16 and 17 year olds in full-time education also had a job, and that there were as many 16 and 17 year olds in full-time education who had jobs as there were school-leavers in work in the same age group.