scope of monetary policy. the three i would highlight are the sharp slowdown in labor productivity growth, the increase in income inequality and the low rate of income mobility. i draw attention to the slowdown in productivity growth for two reasons. first, productivity ultimately drives living standards and how people assess their economic well - being. second, beyond ensuring a stable macroeconomic and financial environment, monetary policy can do little to improve productivity growth. 4 / 6 bis central bankers'speeches annual productivity growth has averaged only 0. 7 percent during the past five years, near the lowest 5 - year pace since the early 1980s. there are a number of competing explanations for the slowdown. these include weak capital investment, a flattening out of educational attainment by new labor market entrants, less new business formation, understatement of quality improvements and, hence, output, and fewer ground - breaking innovations. i suspect that all of these factors play a role. what public policy can do to address this issue is to ensure that the economy operates closer to the frontier of what is achievable. for example, more efforts to improve job skills would prove beneficial — through retraining and apprentice programs, and better alignment of education and training with business needs. also, encouraging small business start - ups would help — by removing barriers for entrepreneurs to establish new businesses, and by creating more start - up incubator programs. i also suspect that well - targeted infrastructure spending would be advantageous if it addresses logistical bottlenecks and enables people to commute to areas with good job opportunities. for example, in the new york city metropolitan region, mass transit is old, slow and crowded. as a new jersey resident, i ’ m still waiting for that second set of rail tunnels into new york city that should have been built years ago. while higher productivity growth could support better living standards, the benefits for low - and middle - income households depend, in part, on how those gains are distributed between business and labor, and on how labor income is distributed across the workforce. moreover, income distribution shouldn ’ t be viewed as a static concept. it is important that people are able to move upward in income through their careers, regardless of their starting point. over the past several decades, three developments have been discouraging. first, the share of labor income relative to business income has fallen. since 1970, the labor share of gdp in the united states has declined about 5 percentage points. similar

and i are closely watching as we determine the appropriate stance of monetary policy going forward. while lending conditions imposed by banks have tightened since march, the changes so far are in line with what banks have been doing since the fed began raising interest rates more than a year ago. that is, it is still not clear that recent strains in the banking sector materially intensified the tightening of lending conditions. let me end by noting that some have argued that the fed's tightening of monetary policy was significantly responsible for the failures and stress in the banking system. they argue we should have taken this into account when setting policy. let me state unequivocally : the fed's job is to use monetary policy to achieve its dual mandate, and right now that means raising rates to fight inflation. it is the job of bank leaders to deal with interest rate risk, and nearly all bank leaders have done exactly that. i do not support altering the stance of monetary policy over worries of ineffectual management at a few banks. we will continue to pursue our monetary policy goals, which ultimately support a healthy financial system. at the same time, we will continue to use our financial stability tools to prevent the buildup of risks in the financial system and, when needed, to address strains that may emerge. 2 / 3 bis - central bankers'speeches 1 the views expressed here are my own and are not necessarily those of my colleagues on the federal open market committee. 2 see christopher j. waller ( 2023 ), " hike, skip, or pause? " speech delivered at the 2023 santa barbara county economic summit, university of california, santa barbara economic forecast project, santa barbara, calif. ( via webcast ), may 24. 3 / 3 bis - central bankers'speeches