The current export boom has boosted output in manufacturing and has helped to stabilize the labor market. The number of jobs is expanding, but unemployment remains stubbornly high. The surge in exports brought about a vigorous expansion in production. In the first quarter of the current year, manufacturing output (partially adjusted for the number of working days) exceeded the corresponding level of 1996 by 5½ percent. With the continuing improvement in the production outlook (according to the WIFO business climate survey), a significant increase in manufacturing output can be expected for the whole year. The labor market stabilized with the pick-up in economic activity. In November, employment exceeded last year's level by 16,000 (+0.5 percent), compared to a drop in employment one year earlier. This upward trend, however, is mainly based on an increase in jobs for women, and may partly result from a rise in part-time work. Unemployment in Austria has not yet seen a turnaround. The seasonally adjusted unemployment rate has remained unchanged over the last few months. The rise in the number of registered unemployed (+6,800 in November on a year-on-year basis) is mainly a statistical artifact. The internationally comparable unemployment rate according to Eurostat was 4.5 percent in November. The relatively satisfactory development of the labor market in Austria is of great importance at a time when the EU summit in Luxembourg focuses strongly on the performance of the labor market. In Germany, no break in the upward trend of unemployment is in sight: unemployment is likely to surpass the 5-million mark. Apparently, there is a certain relation between the propensity of enterprises to invest in machinery and in labor: the precondition for both types of investment are an optimistic outlook and a readiness to take on risks. Austria's current account offers a much less sanguine picture: in an international comparison, Austria is the third from last among the EU countries. In the course of the year, however, the situation improved somewhat. In March, the deterioration (on an year-on-year basis) in the cumulated current account reached a record of ATS 16 billion, but by September this negative margin practically disappeared, mainly the result of the "normalization" of the exchange rates and the weakness of domestic demand (brought about by the austerity budget). Sluggish domestic demand as well as stable unit labor costs helped to make Austria again one of the countries with the lowest inflation. In October, the rate of inflation was only 1.1 percent; if seasonal prices are excluded, the rate reached a low of 0.9 percent. With price increases expected to remain subdued in 1998, Austria will join the European Monetary Union with an excellent inflation record. In the EMU, the economic gains due to price and wage stability in hard-currency countries can no longer be offset by devaluations in soft-currency countries and thus will translate more easily into export gains. On the other hand, changes in the structure of wages and prices are harder to achieve when prices are stable; the role of inflation in smoothing structural change is lost.