capital investment. the essential precondition for the emergence, and persistence, of this virtuous cycle is arguably the decline in the rate of inflation to near price stability. in recent years, continued low product price inflation and expectations that it will persist have promoted stability in financial markets and fostered perceptions that the degree of risk in the financial outlook has been moving ever lower. these perceptions, in turn, have reduced the extra compensation that investors require for making loans to, or taking ownership positions in, private firms. with risks in the domestic economy judged to be low, credit and equity capital have been readily available for many businesses, fostering strong investment. and low mortgage interest rates have allowed many households to purchase homes and to refinance outstanding debt. the reduction in debt servicing costs has contributed to an apparent stabilization of the financial strains on the household sector that seemed to emerge a couple of years ago and has buoyed consumer demand. to a considerable extent, investors seem to be expecting that low inflation and stronger productivity growth will allow the extraordinary growth of profits to be extended into the distant future. indeed, expectations of earnings growth over the longer term have been undergoing continual upward revision by security analysts since early 1995. these rising expectations have, in turn, driven stock prices sharply higher and credit spreads lower, perhaps in both cases to levels that will be difficult to sustain unless the virtuous cycle continues. in any event, primarily because of the rise in stock prices, about $ 12½ trillion has been added to the value of household assets since the end of 1994. probably only a few percent of these largely unrealized capital gains have been transformed into the purchase of goods and services in consumer markets. but that increment to spending, combined with the sharp increase in equipment investment, which has stemmed from the low cost of both equity and debt relative to expected profits on capital, has been instrumental in propelling the economy forward. - 4the consequences for the american worker have been dramatic and, for the most part, highly favorable. a great many chronically underemployed people have been given the opportunity to work, and many others have been able to upgrade their skills as a result of work experience, extensive increases in on - the - job training, or increased enrollment in technical programs in community colleges and elsewhere. in addition, former welfare recipients appear to have been absorbed into the work force in significant numbers. government finances have been enhanced as well. widespread improvement has been evident in the

am optimistic that part of the step - up in productivity growth will be sustained and that it will be reinforced by the renewed upturn in capital spending. continued solid gains in productivity will be an important plus for our economy over the longer run because faster increases in productivity lead over time to higher profits, wages, and standards of living. the jobless recovery also led economists to debate the extent to which the lack of hiring overall and the continued decline in manufacturing jobs specifically represented structural changes, that is, changes that were not likely to be reversed as the recovery strengthened. specifically, a great deal of attention focused on the loss of international competitiveness, foreign outsourcing, and the relocation of jobs to overseas subsidiaries. although these changes are, indeed, a natural consequence of globalization, we have considerable evidence that they are only a small part of the larger story. the ongoing turnover in jobs in our dynamic economy is considerable. the estimates that our staff assembled for a speech earlier this year at duke university by my federal reserve board colleague ben bernanke indicated that, over the past decade, gross private - sector job losses in the u. s. economy have likely amounted to 15 million per year, not including seasonal and short - term layoffs. 1 estimates of jobs lost to imports account for only slightly more than 2 percent of the total. more important, of course, is that the job creation side of the churning process has been even larger roughly 17 million jobs per year. given the total number of private - sector jobs of 108 million, an average year of job gains and losses represents about 30 percent of the total. certainly, the charlotte region is very familiar with this dynamic process of job creation and destruction. in 1990, the charlotte - gastonia - rock hill metropolitan area was relatively dependent on the fortunes of its manufacturing sector. the area had almost 150, 000 manufacturing jobs, which represented almost one - fourth of the area ’ s employment ; by contrast, jobs in professional and business services accounted for just 10 percent of the area ’ s employment, or roughly 60, 000 jobs. ten years later, the picture was dramatically different : largely because of cutbacks at textile mills, the charlotte metropolitan area had lost almost 20, 000 factory jobs. but, at the same time, employment in professional and business services had more than doubled to roughly equal the number of manufacturing jobs that existed here in 2000. employment in education, health, and leisure had also expanded rapidly. certainly, the broader distribution of employment in