the recovery in the motor vehicle industry has been an important contributor to the turnaround in manufacturing, but a range of other industries also appears to be benefiting from the improvement in demand here and abroad. in particular, exports posted a second large monthly increase in october, with substantial gains in shipments of capital goods and consumer goods. the data for october and november showed an encouraging continuation of the positive trend in domestic spending that was reported in the third quarter. in the household sector, purchases of new motor vehicles rose further in november, and other retail spending posted solid increases in recent months. sales of existing homes, which had been on the rise since the beginning of the year, showed further strong gains from september through november, likely the result of the combination of bargain hunting, low mortgage rates, the new homebuyer tax credit, and an influx of investors sensing a market bottom. by comparison, improvement in the market for new single - family homes has been disappointing, and construction of new single - family homes, which turned up over the first half of last year, seemed to flatten out in the second half. the slow improvement in new homebuilding is a reminder that the housing market is still being weighed down by a number of factors including the high level of foreclosures, the tight credit conditions faced by some builders, and reduced mortgage availability for some households, especially those not meeting the criteria required for their mortgages to be eligible for securitization in government - insured pools. competition from lower - priced resales and foreclosures could lead new home sales to lag relative to existing homes for some time. in the business sector, spending on equipment and software has also firmed. the third quarter saw a pickup in purchases of motor vehicles as well as high - tech equipment and software. more recently, shipments and orders for other types of nondefense capital goods have turned up. meanwhile, construction outlays on nonresidential buildings have continued to fall sharply, as that sector faces extremely unfavorable economic and financial conditions. turning to developments in the financial sector, many markets recovered significantly last year from the widespread dislocations that occurred in the second half of 2008. functioning in interbank and other short - term funding markets has improved considerably, interest rate spreads on corporate bonds have narrowed significantly, prices of syndicated loans have increased, and some securitization markets have resumed operation. equity prices have increased sharply since their low in early 2009,

/ 4 percentage points lower than its peak during the recession. and even though the latest employment report was somewhat disappointing, private sector payrolls expanded, on average, by about 210, 000 per month in the first quarter, up from gains averaging around 150, 000 per month during most of 2011. other labor market indicators have shown similar improvement. this news is certainly welcome, yet it must be kept in perspective. our economy is recovering from the steepest and most prolonged economic downturn since the 1930s, and these job gains still leave us far short of where we need to be. the level of private payrolls remains nearly 5 million below its pre - recession peak, and the unemployment rate stands well above levels that i, and most analysts, judge as normal over the longer run. i appreciate assistance from members of the board staff – james clouse, william english, michael leahy, david lebow, andrew levin, andrea lowe, steven meyer, and david reifschneider – who contributed to the preparation of these remarks. bis central bankers ’ speeches figure 1 shows the unemployment rate together with the outlook of professional forecasters from last month ’ s blue chip survey. 2 the solid blue line shows the blue chip consensus and the blue shading denotes the range between the top 10 and bottom 10 projections of forecasters in the march blue chip survey. the figure also shows the central tendency of the unemployment projections that my fomc colleagues and i made at our january meeting : those projections reflect our assessments of the economic outlook given our own individual judgments about the appropriate path of monetary policy. as in the blue chip consensus outlook, fomc participants ’ projections indicate that unemployment will decline gradually from current levels. included in the figure as well is the central tendency of fomc participants ’ estimates of the longer - run normal unemployment rate, which ranges from 5. 2 percent to 6 percent. the unemployment rate is expected to remain well above its longer - run normal value over the next several years. as you know, economic forecasts always entail considerable uncertainty. figure 2 illustrates the degree of uncertainty surrounding projections of unemployment. the gray shading denotes a model - based 70 percent confidence interval for the unemployment rate, based on the sorts of shocks that have hit the economy over the past 40 years. 3 judging from historical experience, the consensus projection could be quite far off, in either direction. that said, the figure also shows that labor market slack at present is so large that even a very large