##meted in february. together, these factors are likely to restrain spending growth in the period ahead. this restraint should be offset somewhat beginning in the late spring, when many households will start to receive the tax rebates that are the centerpiece of the recent fiscal stimulus package. business investment in equipment and software also decelerated toward the end of last year, and a number of factors appear likely to weigh on spending in the near term. indicators of business sentiment from a variety of national and regional surveys have deteriorated, on balance, in recent months. moreover, spreads on corporate bonds across a wide range of credit qualities have been moving up, especially for riskier firms, and an increasing number of banks report that they are tightening lending standards for business loans. all told, real spending on equipment and software seems likely to be subdued in the near term. it is anticipated that investment spending should receive some help in the second half of this year from the accelerated depreciation provisions in the fiscal stimulus bill ; however, based on experience with a similar tax provision in 2002 and 2003, the magnitude and timing of these effects is very uncertain. investment in nonresidential structures continued to grow robustly through the end of last year, with most major components contributing to the strong gains. however, prospects for the coming year are less buoyant given the tightening credit conditions as well as the slowdown in economic activity more broadly. turning now to international trade, export growth has been a bright spot for the u. s. economy, boosted by past declines in the exchange value of the dollar and solid economic growth abroad. indeed, rising demand for u. s. exports has offset some of the negative effects on producers here in the united states from the deterioration in domestic spending. although foreign economies also have been affected by financial turmoil, and growth among our trading partners is showing some signs of slowing, expanding exports should continue to help support economic activity in the united states. in the labor market, private payrolls decelerated over the course of 2007 and were reported to have been unchanged in january. the unemployment rate, after remaining near 4 - 1 / 2 percent in the first half of last year, has moved up about 1 / 2 percentage point to nearly 5 percent, its highest level since late 2005. and the labor market appears to have softened further in february. initial claims for unemployment insurance, which can be a timely indicator of labor market activity, moved up appreciably in february. moreover,

another country. the ease with which firms can circumvent national borders and regulatory jurisdictions is a challenge of one dimension. if circumvention results in unsafe or unsound banking practices, it is a problem of another dimension. the problem may end up back in the united states after all. it is for these reasons that the federal reserve and the other u. s. banking agencies have been advocating that international agreements on banking supervision have a risk focus. for example, the basle committee on supervision ( under the bank for international settlements ) recently agreed to embrace a portfolio - based, risk - sensitive approach to setting capital requirements for market risk. instead, supervisors will be building upon the processes banks use to measure trading risks. this should substantially reduce regulatory burden and make standards more compatible with industry practice. in addition, the basle committee has agreed to common frameworks for gaining information on the derivatives activities of supervised institutions. a major task before us is to work with emerging - market countries to strengthen and unify banking supervision. greater consistency should reduce the risk of systemic problems arising from a financial disruption in any particular market. while most of these efforts have focused on market risk, i think it is fair to point out that the major exposure for most banks is credit risk. looking to the future, will the risk - based capital approach for credit risk ever evolve into an internal models approach? the answer is probably yes ; however, with credit - risk modeling in such an early stage of development, it is premature to predict just when credit modeling and the supporting data will develop to the point that they can be relied upon as effective management tools. i am, however, encouraged by progress in modeling credit risk. the risk - based capital accord has worked well in the past and remains useful today. it was an excellent vehicle for bringing about a convergence in bank capital standards worldwide. but it does illustrate the problems of a standardized scheme. for example, banks have an incentive to securitize low - risk assets to avoid regulatory capital charges that unregulated competitors need not meet. alternatively, market participants can get a false sense of security about a bank ’ s condition if the risk - based capital ratios understate the true risks of the bank ’ s portfolios. recognizing these shortcomings, we regulators need to continually review and revise our standards, as we have proposed in connection with certain securitizations of assets. conclusion some of you in the audience may be surprised