richard h clarida : us economic outlook and monetary policy speech by mr richard h clarida, vice chairman of the board of governors of the federal reserve system, at the 35th annual nabe economic policy conference & quot ; promoting global growth and domestic economic security & quot ;, washington dc, 28 february 2019. * * * thank you for the opportunity to participate in the 35th annual economic policy conference of the national association for business economics. before we begin our conversation, i want to share a few thoughts about the outlook for the economy and monetary policy. 1 current economic situation and outlook the u. s. economy expanded at a robust pace in 2018, and my baseline outlook for 2019 foresees somewhat slower but still - solid growth in the year ahead. in july, just about four months from now, the current economic expansion will become the longest on record. the federal reserve is charged by the congress with achieving and sustaining a dual mandate of maximum employment and price stability, and the economy is as close as it has been in many years to meeting these goals. the unemployment rate is near the lowest level recorded in 50 years, and average monthly job gains have continued to well outpace the increases needed over the longer run to provide jobs for new entrants to the labor force. most measures of nominal wage growth are running at or somewhat above the 3 percent pace, and recent wage gains have been strongest for lowerskilled workers. moreover, the strength of the labor market appears to have encouraged people to join the labor force and others, who might have left it, to continue working. the labor force participation rate - the share of people who are either working or looking for work - - has moved up 1 / 2 percentage point over the past year, and the participation rate of prime - age workers ( those 25 to 54 years old ) has risen about 1 - 1 / 2 percentage points over the past few years. inflation, as measured by the 12 - month change in the price index for personal consumption expenditures ( pce ), is estimated to have been a little bit below 2 percent of late, largely because of recent declines in energy prices. however, core pce inflation, which excludes food and energy prices and tends to be a better indicator of future inflation, is estimated to have been about 2 percent. market - based measures of inflation compensation have moved lower, on net, since last summer, though they have increased some recently, and some survey - based measures of longer

? on the one hand, the diffusion of scientific and technological research throughout the world potentially benefits everyone by increasing the pace of innovation globally. for example, the development of the polio vaccine in the united states in the 1950s provided enormous benefits to people globally, not just americans. moreover, in a globalized economy, product and process innovations in one country can lead to employment opportunities and improved goods and services around the world. on the other hand, in some circumstances, the location of r & d activity can matter. for example, technological prowess may help a country reap the financial and employment benefits of leadership in a strategic industry. a cutting - edge scientific or technological center can create a variety of spillovers that promote innovation, quality, skills acquisition, and productivity in industries located nearby ; such spillovers are the reason that high - tech firms often locate in clusters or near leading universities. 13 to the extent that countries gain from leadership in technologically vibrant industries or from local spillovers arising from inventive activity, the case for government support of r & d within a given country is stronger. 14 how should governments provide support for research and development? the economic arguments for government support of innovation generally imply that governments should focus particularly on fostering basic, or foundational, research. the most applied and commercially relevant research is likely to be done in any case by the private sector, as private firms have strong incentives to determine what the market demands and to meet those needs. 15 if the government decides to foster r & d, what policy instruments should it use? a number of potential tools exist, including direct funding of government research facilities, grants to university or private - sector researchers, contracts for specific projects, and tax incentives. moreover, within each of these categories, many choices must be made about how to structure specific programs. unfortunately, economists know less about how best to channel among organisation for economic co - operation and development ( oecd ) nations, the united states is estimated to have spent the most on r & d in 2010, followed by japan, germany, south korea, france, and the united kingdom ( battelle and r & d magazine, 2010 ). as a percentage of gdp, israel ranked first among oecd nations in r & d spending, followed by finland, sweden, japan, and south korea ( oecd, 2010 ). china ’ s gross r & d expenditures are estimated to have increased more than five - fold between 1997 and 2007 and, by