Los Angeles Apple Affairs Council & Town Hall
Los Angeles, CA
By Mary C. Daly, President and CEO, Federal Reserve Bank of San Francisco
For charge on October 15, 2019 12:30PM PT
Download PDF Adaptation (877.25 kb)
Thank you so abundant for the allurement to be here. It’s a absolute honor. The issues
of our day crave a charge to dialogue. Allowing assorted groups to
discuss, debate, and apprentice raises the best anniversary and creates bigger outcomes.
The Los Angeles Apple Affairs Council and Town Hall Los Angeles accept promoted
such chat for decades. And now that you’ve abutting forces, I apperceive your
bequest will abound alike more. I’m abandoned captivated to be one of the first
speakers of this new partnership.
Today, I’m activity to allocution about one of the best analytical issues of our day:
bread-and-butter growth. How we are growing now… advance we’ve accomplished in the
past… and what factors could atmosphere or activation our advance in the future.
But afore I begin, I charge to accord the accepted disclaimer: the animadversion I’m
about to bear are my own and don’t necessarily reflect the angle of anyone
abroad aural the Federal Reserve System.
So let’s alpha with advance today. How’s the abridgement doing?
Here, the anniversary is abundantly positive. The abridgement continues to aggrandize at a solid
pace. Job advance is strong, unemployment is low, customer spending is healthy,
and households abide confident. These are all absolutely acceptable signs.
On the added hand, we’ve yet to accomplish our aggrandizement ambition on a sustained
basis. And a cardinal of headwinds – such as barter ambiguity and slower global
advance – accept started to gust. This has acquired accomplishment and business
advance to abate appreciably over the advance of the year.
To ensure we sustain the amplification adjoin these headwinds, the Fed has
adopted a added accommodative budgetary action position – acid the federal
funds amount in both July and September. This adaptation should advice the
abridgement abide to abound so that we can accomplish added advance on our mandated
goals of abounding application and amount stability.
Drags on approaching growth
But what is the clip of advance we’re aggravating to hit? What’s sustainable?
This cardinal has afflicted badly over time. During the 60 years above-mentioned to
the Great Recession, GDP advance averaged about 3.5 percent.
During the accepted expansion, advance has averaged abandoned 2.3 percent. And this
slower pace, far from actuality an anomaly, is accepted to continue. Most
economists and forecasters, including me, adumbrate GDP advance will boilerplate a
bit beneath 2 percent for the accountable future.1
So what’s activity on? Why is America’s abridgement accretion at a abundant slower pace
than it acclimated to?
To explain, we charge to attending at the axiological drivers of bread-and-butter growth:
abundance and the activity force.
Let’s aboriginal accede abundance growth. Although it’s fluctuated over time,
it’s about contributed a little over 1 allotment point to all-embracing GDP
advance aback the 1970s. It’s anticipation to do about the aforementioned activity forward. So
the acumen for slower advance acceptable isn’t productivity.2
Activity force advance tells a altered story. In the 1970s, aback the U.S.
citizenry was accretion rapidly and women were entering the workforce in
ample numbers, activity force advance abandoned averaged 2.7 percent
annually. That agency – alike if abundance advance had been aught – the economy
would accept broadcast at 2.7 percent. That’s faster than the clip of our current
Aback that peak, the cardinal has appear bottomward substantially. The activity force has
developed beneath than 0.5 allotment point annually for the accomplished decade – and it’s
anticipation to break that way for at atomic addition ten years.3
Abundant of this abatement in activity force advance is due to simple demographic
changes. Our citizenry is aging. Fewer babies are actuality born. This dynamic
isn’t altered to the United States – countries about the apple are
experiencing agnate trends.
But there’s article that is altered in America. We’ve accomplished a
abatement in activity force accord for bodies amid the ages of 25 and 54
– what we generally alarm prime-age workers. And appropriate now, there is a smaller
atom of this accumulation alive or actively gluttonous assignment than we had aback in
the backward 1980s and 1990s.
This raises an important question: why aren’t added prime-age Americans
There isn’t a simple answer. There’s a accomplished host of issues at play.
On one end of the spectrum, analysis suggests that some of the bead may be
attributed to wealthier families allotment to accept abandoned one earner.4
So families with the banking adeptness to accomplish these work-life choices may
anniversary for some of the absent activity force participation.
On the added end of the spectrum, abounding bodies break home to booty affliction of
accouchement not out of choice, but out of necessity. Rising childcare costs and
abridgement of admission to affectionate leave acceptable accord to lower activity force
accord rates, abnormally amid women.5
Then there’s the alteration activity market, which is abrogation abounding bodies on the
sidelines – absent to work, but not accepting the abilities or apprenticeship to keep
clip with the ever-evolving economy.6
Added jobs currently crave a bachelor’s amount than a aerial academy diploma.7
Unfortunately, academy achievement ante haven’t kept up with demand. Recent
abstracts tells us abandoned 37 percent of 25- to 29-year-olds accept a college
And we see that abundant of the abatement in prime-age workforce accord is
concentrated amid individuals who abridgement a academy degree.9
These are aloof a few of the factors active bottomward activity force accord in
the United States. We could additionally allocution about the aptitude actuality absent to opioid
addiction. Or geographic mismatches that leave rural communities with
affordable apartment and few jobs, and burghal communities with abounding jobs and
skyrocketing apartment costs.
Whatever the reason, we accept added bodies sitting on the sidelines than in the
past. This poses attainable problems for individuals and families – but it also
poses problems for our economy.
Absent a billow in abundance growth, apathetic advance in the workforce is going
to be a cogent structural abstemiousness on America’s bread-and-butter future.
The present doesn’t accept to ascertain the future
So what can we do? Are we absolutely destined to abound at aloof 2 percent moving
forward? The acknowledgment is acceptable yes… unless we accomplish cogent changes that
bigger appoint all that aptitude we’re abrogation on the sidelines. This will
crave a concerted accomplishment from abounding stakeholders – including the Federal
At the Fed, our job is to abutment a advantageous abridgement and accomplish the dual
authorization goals of abounding application and amount stability. The argumentation of our mandate
is that a able abridgement allowances everyone. And we can see this in the current
Ten years of abiding advance accept bargain unemployment ante to abreast historic
lows and pulled millions of Americans aback into the activity force. This continued and
able-bodied amplification has been decidedly benign to historically
less-advantaged workers, including African Americans, Hispanics, and those
with beneath than a academy degree.
This makes sense. Aback activity markets are tight, as they are now, businesses
accept to attempt for workers and acquisition new means to ample jobs. They recruit more
intensively, acclimatize hiring standards, and attending to a broader basin of potential
employees. This creates new opportunities for beneath advantaged workers and
allows them to get a ballast in the activity force.10
Indeed, the abstracts acquaint us that the backbone of the accepted amplification has
narrowed abiding gaps amid added and beneath advantaged groups.11
But while these gaps are narrowing, they still persist. And budgetary policy
abandoned isn’t abundant to abutting them. Reducing the structural barriers that limit
workforce accord or accumulate individuals from extensive their abounding potential
requires demography a adamantine attending at some of our amusing and abode policies.
There are any cardinal of examples we could consider, but I’d like to focus on
two from contempo research.
The aboriginal looks at women. In the mid-1990s, a gap began to anatomy in the
accord ante of women in the United States and Canada. By 2017, the
prime-age accord amount for American women was 8 allotment credibility lower
than for agnate women in Canada. This is a amazing difference. It
represents about 5 actor U.S. women who could be in the activity force. A
growing anatomy of assignment suggests that this aberration can be attributed in part
to Canada’s acceptable affectionate leave behavior and childcare subsidies, which
acquiesce women to abide absorbed to the activity bazaar afterwards adolescent birth.12
My additional archetype relates to educational accomplishment and career opportunities.
African Americans and Hispanics accept four-year degrees at about bisected the
amount of whites.13
And alike aback they do get degrees, their career paths accept a flatter
In economics parlance, we alarm this is a misallocation of talent.
But how cher is this array of misallocation? It’s adamantine to apperceive in absolute time,
but we can attending to history for some indication. Researchers at Stanford and
the University of Chicago advised advance in U.S. per capita achievement between
1960 and 2010. They asked how abundant of that advance was due to the abatement of
structural barriers, such as absolute discrimination, lower academy affection in
boyhood communities, and banking obstacles that kept less-advantaged people
from advancing high-paying careers in fields like anesthetic and law. The
allegation were striking. They estimated that the abatement of structural barriers
accounted for up to 40 percent of the assets in U.S. per capita output.15
So aptitude misallocation affects our basal line. This suggests that equalizing
educational accomplishment ante and career opportunities for beneath advantaged
groups could aftermath a ample bread-and-butter boost.
One being at a time
Up until now, I’ve talked about what institutions can do to advice get talent
off the sidelines and into the activity force. But I appetite to end with what people
can do. Because this is what gives me the best hope.
Let me booty you to Firebaugh, California, about four hours arctic of actuality in
Fresno County. It’s a rural agronomical community. Abounding of the bodies living
there don’t allege English as their aboriginal language. It’s one of the poorest
regions in America.
And yet… 97 percent of Firebaugh’s kids alum from aerial school. That’s 12
allotment credibility academy than the civic average. And best of them go on to
academy or added post-secondary study.16
So how do they do it? The absolute association of Firebaugh – from parents to
agents to acceptance to bounded leaders – accept fabricated apprenticeship a singular
But they’re not the abandoned one.
Barrio Logan, abreast city San Diego, is a mostly Latinx community. The
boilerplate anniversary assets for a ancestors of four there is $25,000. Abandoned 38 percent
of adults accept a aerial academy diploma. Aloof 3 percent authority a bachelor’s degree.
But the Barrio Logan Academy Institute is allowance change that narrative. They
alpha advancing aboriginal bearing acceptance for academy in third grade. For kids
enrolled in their program, 100 percent end up admission from aerial academy –
and 100 percent go on to accept in college.17
These are adorning success stories. They acquaint us the ability of people. And
they appearance us what’s attainable aback bodies appear calm to adjudge that their
accompaniment today doesn’t accept to actuate their accompaniment tomorrow.
So how do we change the future? How do we calibration places like Firebaugh and
The acknowledgment is simple: with intention.
Fairness has been a abiding aspiration of our society. But aspiration
isn’t enough. We accept to about-face our admiration to be fair into a charge to
include. Inclusion has to become our practice.
We accept to appear together. We accept to amalgamate the armament of our institutions…
our communities… our people.
That’s the way we acceleration aloft what the abstracts acquaint us is possible. That’s the way
we’ll accord the abutting bearing a bigger approaching than the one we inherited.
1. Board of Governors (2019). The median
of FOMC affiliate projections of longer-run advance is 1.9 percent.
2. Fernald and Li (2019).
3. Congressional Budget Office (2019) and
Fernald and Li (2019).
4. Hall and Petrosky-Nadeau (2016).
5. Daly et al. (2018) and Blau and Kahn
6. Valletta and Barlow (2018) and
Charles, Hurst, and Schwartz (2019).
7. Carnevale, Jayasundera, and Gulish
8. Civic Center for Education
9. See Tuzemen (2018), who focuses on
10. Petrosky-Nadeau and Valletta
11. Aaronson et al. (2019).
12. Daly et al. (2018).
13. Civic Center for Education
14. Daly et al. (2017).
15. Hsieh et al. (2019).
16. Firebaugh Aerial Academy (2017).
17. Barrio Logan Academy Institute
Aaronson, Stephanie, Mary C. Daly, William Wascher, and David W. Wilcox. 2019.
“Okun Revisited: Who Allowances Best From a Able Economy?”
Brookings Papers on Bread-and-butter Activity Conference Draft, Spring.
Barrio Logan Academy Institute. 2019.
“The Charge for BLCI.”
Website accessed October 8, 2019.
Blau, Francine D., and Lawrence M. Kahn. 2013.
“Female Activity Supply: Why Is the United States Falling Behind?”
American Bread-and-butter Review 103(3, May), pp. 251–256.
Board of Governors of the Federal Reserve System. 2019.
“FOMC Projections materials, attainable version.”
Carnevale, Anthony P., Tamara Jayasundera, and Artem Gulish. 2016.
America’s Divided Recovery: Academy Haves and Have-Nots.
Washington, DC: Georgetown University Center on Apprenticeship and the Workforce.
Charles, Kerwin Kofi, Erik Hurst, and Mariel Schwartz. 2019. “The
Transformation of Accomplishment and the Abatement in U.S. Employment.” Chapter
5, NBER Macroeconomics Anniversary 2018, aggregate 33, edited by Martin
Eichenbaum and Jonathan A. Parker. Chicago: University of Chicago Press.
Congressional Budget Office. 2019.
An Update to the Budget and Bread-and-butter Outlook: 2019 to 2029.
Daly, Mary C., Joseph H. Pedtke, Nicolas Petrosky-Nadeau, and Annemarie
“Why Aren’t U.S. Workers Working?”
FRBSF Bread-and-butter Letter 2018-24 (November 13).
Daly, Mary C., Bart Hobijn, and Joseph H. Pedtke. 2017.
“Disappointing Facts about the Black-White Wage Gap.”
FRBSF Bread-and-butter Letter 2017-26 (September 5).
Fernald, John, and Huiyu Li. 2019.
“Is Apathetic Still the New Normal for GDP Growth?”
FRBSF Bread-and-butter Letter 2019-17 (June 24).
Firebaugh Aerial School. 2017.
“Firebaugh Aerial School: Academy Accountability Report Card Reported Using
Abstracts from the 2015–16 Academy Year.”
Hall, Robert, and Nicolas Petrosky-Nadeau. 2016.
“Changes in Activity Accord and Household Income.”
FRBSF Bread-and-butter Letter 2016-02 (February 1).
Hsieh, Chang-Tai, Erik Hurst, Charles I. Jones, and Peter J. Klenow. 2019.
“The Allocation of Aptitude and U.S. Bread-and-butter Growth.”
Econometrica 87(5, September), pp. 1,439–1,474.
Civic Center for Apprenticeship Statistics. 2018.
“2018 Tables and Figures.”
Digest of Apprenticeship Statistics, Table 104.20.
Petrosky-Nadeau, Nicolas, and Robert G. Valletta. 2019.
“Unemployment: Lower for Longer?”
FRBSF Bread-and-butter Letter 2019-21 (August 19).
Tuzemen, Didem. 2018.
“Why Are Prime-Age Men Vanishing from the Activity Force?”
Federal Reserve Bank of Kansas City Bread-and-butter Review Q1, pp. 5–30.
Valletta, Robert G., and Nathaniel Barlow. 2018.
“The Prime-Age Workforce and Activity Bazaar Polarization.”
FRBSF Bread-and-butter Letter 2018-21 (September 10).
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