OECD gloomy on jobs despite '2.6% growth'

THE INDUSTRIAL world is poised to grow by a faster-than-expected 2.6 per cent this year supported by a robust US expansion, a decisive recovery in Germany and the first signs of upturn in Japan, the Organisation for Economic Co-operation and Development said yesterday.

But in its latest semi-annual forecasts for the world economy, the OECD says it does not foresee the global jobs crisis abating.

Without new policies to relieve unemployment, the jobless total in Europe is predicted at 11.7 per cent of the labour force, or about 22 million, in 1994, edging up in 1995. This is slightly worse than the agency's December forecasts.

Unemployment throughout the 25 industrial countries belonging to the OECD will this year total 8.5 per cent of the labour force or 35 million, falling slightly to 8.3 per cent in 1995.

The agency will tomorrow release its jobs study, conducted over the past two years, which is expected to press for further labour market deregulation, weaker minimum wage laws, and revamped benefit systems to encourage people to seek work.

The report also rejects the notion that the rapid pace of technological change or the globalisation of markets are directly responsible for persistent unemployment.

During the annual meetings today and tomorrow in Paris, OECD officials are to press ministers from member states to award the secretariat the mandate of jobs doctor - in which it would devise state-by-state recommendations for easing high unemployment.

The OECD has upgraded its growth forecasts for the US, Germany and Japan. Growth of 4 per cent is expected in the US, easing back to 3 per cent in 1995 as a result of rising interest rates. The Japanese recovery is predicted to get under way in the second half of this year, resulting in growth of 0.8 per cent for the year, accelerating to 2.7 per cent in 1995. Germany is expected to expand by 1.8 per cent this year. But the pace of growth will quicken sharply and by the second half of next year, OECD economists think the German economy will be growing at a 4.3 per cent annual rate.

The expansion in the industrial world as a whole is forecast to quicken to 2.9 per cent by 1995. World trade is expected to expand by 6.7 per cent in 1994 and by a faster 7.2 per cent next year.

Despite deep-seated market fears of rekindled inflation pressures, the OECD sees little cause for concern. Inflation in the US is put at 2.1 per cent in 1994 and 2.8 per cent next year, with short- term rates rising from a 4.2 per cent average this year to 5.5 per cent in 1995.

Hamish McRae, page 28