an acceptable trade - off with respect to systemic risk and thereby to achieve the optimal balance of market discipline and regulatory standards. market discipline involves information and incentives. markets need access to information to judge the risk profiles of banking organizations. but, to make market discipline work, there also have to be incentives for banks to respond to the changing judgment of the market. it may be possible to increase market discipline by requiring large, internationally active banks to issue a minimum amount of certain types of subordinated debt to the public. an appealing aspect of this approach is that subordinated debt holders, so long as they are not bank “ insiders ”, face only downside risk, and thus their risk preferences are very close to those of the fdic. subordinated debt holders would therefore be expected to impose market discipline on the bank that is quite consistent with what bank supervisors are trying to do, including encouraging banks to disclose more information about their financial condition. observed risk premiums on subordinated debt could perhaps be used to help the fdic set more accurate risk - based deposit insurance premiums, and such debt would provide an extra cushion of protection for taxpayers. an additional benefit of having subordinated debt traded on the open market is that price movements would provide a clear signal of the market ’ s evaluation of the bank ’ s financial condition that, even if it were not used to help price deposit insurance, could serve as an early warning aid to supervisors. such an approach would most likely be limited to the largest banks for at least two reasons. first, it is the increased size of banking organizations and the financial innovations at the largest and most sophisticated banks that are challenging the effectiveness of the current regulatory and supervisory framework. it may therefore be appropriate, even essential, to differentiate the regulatory standards and supervisory practices at large, sophisticated, and internationally active banks - - the predominant sources of systemic risk - - from those that apply to small and medium - sized banks. second, it is unclear just how deep and liquid a market in bank subordinated debt would be and what access small and medium sized banks would have to this market. today, almost no smaller banks, for example, issue subordinated debt, while a majority of the largest banks already participate to some degree in this market. however, even at the largest banks that participate, most of their subordinated debt appears to be held by their holding company, not by independent third parties. this suggests that the development of an operationally feasible program for mandatory subordinated debt would

market recovery to date has been more rapid than the initial pace following the global financial crisis, but it has been uneven, and the easiest the most recent small business lending survey ( dated september 29, 2020 ) is available on the federal reserve bank of kansas city ’ s website at https : / / www. kansascityfed. org / research / indicatorsdata / smallbusinesslendingsurvey. see robert w. fairlie ( 2020 ), “ the impact of covid - 19 on small business owners : evidence of earlystage losses from the april 2020 current population survey, ” nber working paper series 27309 ( cambridge, mass. : national bureau of economic research, june ), https : / / www. nber. org / papers / w27309. pdf. - 4improvements are likely behind us. the pace of labor market improvement is decelerating at a time when employment is still far short of its maximum level. as of september, total nonfarm payroll employment had recovered about half of the jobs that were lost in march and april, and it remained about 11 million jobs below its february level. private payroll gains in september were less than in july and august and came in far below the gains posted in may and june. although the number of persons on temporary layoff has dropped back sharply from the highs in the spring to a level of 4. 6 million in september, the number of permanent job losers has been rising since february and was at a level of 3. 8 million in september. the job - finding rate for those who are permanently laid off is less than half the rate of those on temporary layoff, so the speed of labor market improvement is likely to decelerate further if these trends continue. similarly, after seeing large declines during much of the summer, initial claims for unemployment insurance have crept up recently and remain elevated. the 1 / 2 percentage point decline in the unemployment rate in september to 7. 9 percent was accompanied by a 0. 3 percentage point decline in the labor force participation rate ( lfpr ). 4 the recent decline in prime - age labor force participation has been due primarily to women. september marks the third consecutive monthly decline in the prime - age female lfpr since it bounced back in may and june. the decline in september, when many schools moved to virtual instruction, was especially pronounced for women ages 35 to 44. indeed, the fraction of prime - age respondents to the current