shortcoming of the current expansion has been the dearth of job creation over the past two years. last week ’ s report that employers added 308, 000 workers to their payrolls in march was encouraging and may signal that the recovery in the labor market is gaining traction. even so, the level of private employment remains more than 500, 000 - or 1 / 2 percent - below that at the trough of the recession in november 2001. the weak performance of the labor market over this period has been quite unusual by the standards of past economic recoveries, and, indeed, it is even weaker than during the infamous “ jobless recovery ” of the early 1990s. for example, employment rose about 2 percent in the twenty - eight months following the 1990 - 91 recession. and, in the other seven post - world war ii recoveries, employment growth averaged more than 8 percent over a period of comparable length. economic forecasters ’ consensus is that, as the expansion matures, employment will continue to improve sufficiently to make noticeable gains in the utilization of labor resources. i judge that to be a reasonable assessment. nonetheless, one cannot definitively rule out the possibility that hiring will fall short of expectations over the next several months as it had up until the most recent report. in particular, the lackluster performance we have seen in the labor market, even as real gdp has been moving up strongly, raises the question of whether an unusually large portion of the job cuts implemented by firms in recent years represent permanent layoffs that will only gradually be offset by job creation elsewhere in the economy. a number of hypotheses have been put forth as potential causes of the generally disappointing performance of the labor market, and, indeed, it seems likely that several factors have contributed to the shortfall in hiring. but any meaningful explanation must account for the surprising strength in productivity growth in recent years. in particular, labor productivity in the nonfarm business sector rose 4 - 1 / 4 percent in 2002 and nearly 5 - 1 / 2 percent in 2003, the largest back - to - back increases since the early 1960s. let me review the major hypotheses advanced to explain labor market developments. one possibility is that the same factors that induced businesses to take an unusually cautious approach to capital spending also influenced their willingness to add new workers. if so, then some of the surprising weakness in employment growth and some of the strength in productivity may have reflected a tendency by employers to stretch their existing work forces beyond a level

to call for change, and we all need to press forward on this issue. see 70 fr 71218 ( 84 kb pdf ) ( november 28, 2005 ). the clearing house and frb financial services, " business - to - business wire transfer payments : customer preferences and opportunities for financial institutions, " ( october 2006 ). http : / / www. frbservices. org / wholesale / pdf / wire _ transfer _ research. pdf ( 598 kb pdf ) " a summary of the roundtable discussion on the role of wire transfers in making low - value payments, " federal reserve bank of new york ( may 2006 ). http : / / www. federalreserve. gov / paymentsystems / lowvaluepay / default. htm challenges to innovation although improving convenience has been an important force behind successful innovation, consumers and businesses have increasingly demanded greater security in their electronic payments, particularly as more information is linked to these payments. in general, there is often a basic tradeoff between security and convenience : the easier a system is to use and access, the less secure it tends to be. striking the appropriate balance between convenience and security is a key challenge. how can we manage fraud and operational risks, along with credit and other risks, without unduly interfering with the ease of using a particular system? as i noted earlier, technological change can help stimulate successful innovations and make it more convenient for businesses and consumers to make and receive payments and link information to those payments. but technological change can also generate new methods of perpetrating fraud and disrupting payments systems – and thus require us to develop new responses to these challenges and risks. check fraud has long been an important issue for the banking system and has been increasing recently, as described in the board ’ s check 21 report. in the electronic sphere, card systems have also had to deal with fraud since their inception. naturally, cost - benefit calculations guide the pace of innovation to address fraud. these costs typically include technology and labor costs, as well as the time and other requirements needed to authenticate and authorize transactions. benefits typically include the monetary losses, customer problems, and legal costs that are avoided. important but more difficult - to - quantify benefits include the avoidance of reputational damage to payments system participants, as well as sustained public confidence in the payments system. in the context of this costbenefit framework, we can anticipate that when the costs of prevention fall