Prolonged Cyclical High Can Hardly Reduce Unemployment

Labour market reaction to the faster pace of output growth is changing. While in 1988 it consisted primarily of a jump in productivity per worker and in longer working hours, there has been a marked pick-up of employment growth since last December. Because of the high level of orders in manufacturing and construction and due to mild weather conditions firms resorted less than usual to seasonal lay-offs of workers. Thus, unemployment in winter was notably lower than in the last years. Since early spring, however, the fall in unemployment has levelled off in spite of the continuing boom in business activity. People registered as unemployed are facing structural barriers in finding a new job. Still, labour shortages are unlikely to develop soon as supply is very elastic. The number of foreign workers has risen by almost 12 percent year-to-year.