Remarkably, employment growth in the euro area showed resilience to the economic slowdown at the beginning of this decade, with employment growing on average by 1.1% over the period 2000-2005, compared to 0.9% in the US. However, the employment rate in the euro area remains low by international standards: for example, the employment rate was 71.2% in the US in 2004 3 and the unemployment rate clearly too high compared with, for example, the unemployment rate of about 5.0% in the US in 2005 4 . Furthermore, since the launch in 2000 of the Lisbon strategy, the annual growth rate for the euro area has averaged 1.8% per year (compared to 2.8% in the US), thus remaining behind its main competitor. When comparing the euro area’s economic performance to the US, there is evidence of increasing disparities in growth. Since the beginning of the 1990s, the gap in per capita income growth between the US and the euro area has continuously widened - by 0.8% on average per year during the 1990s, increasing to 1.3% per year from 2002 onward. The main explanatory factor behind these developments is the diverging trend in hourly labour productivity growth between the euro area and the US. During the 1980s, hourly labour productivity in the euro area grew on average by 2.4% compared to 1.3% in the US. In the 1990s, hourly labour productivity in the euro area increased on average by 1.8%, decelerating to 1.2% in 2000-2004.
Additionally, better education and training help to reduce mismatches in the labour market and allow for a smoother reallocation of workers between sectors and firms. 15 The last decades have already brought about an enormous increase in the level of educational attainment, the so-called “catch-up effect in education”. In the euro area, according to OECD data for 2003, an average of 73% of those aged 25-34 had attained at least upper secondary education, compared to only 46% of persons aged 55-64. 16 Nevertheless, meeting the challenges of technological progress  11  See also ECB (2006), ibid. 12  See the World Bank web site www.doingbusiness.org. 13  See the World Bank web site www.doingbusiness.org. 14  European Commission (2004) “A 3% R&D effort in Europe in 2010: an analysis of the consequences”, study prepared by the Research Directorate General of the European Commission. 15  See G. Schwerdt and J. Turunen (2005): “Growth in euro area labour quality”, ECB Working Paper Series, No 575, January 2006. 16  OECD (2005) “Education at a glance”. 4  BIS Review 44/2006  and ensuring the labour force’s employability and flexibility, requires that human capital is continuously adjusted to labour market needs through improved education and training as well as lifelong learning. In 2005, the US annual expenditure on higher education institutions per student was 22,234 USD, while in the euro area the equivalent of only about 9,200 USD was spent. Furthermore, we need more high quality scientists and researchers.