relationship between job vacancies and the unemployment rate. 3 to quantify the effects of restrictive monetary policy on unemployment, we used standard empirical methods to calibrate the theoretical model. we showed that if restrictive monetary policy could lower the vacancy rate from 7. 5 percent to 4. 5 percent via a significant decline in job vacancies, there would be a relatively small increase in the unemployment rate - from 3. 7 percent to 4. 2 percent. based on this analysis, we argued that, as long as the involuntary job - separation rate did not rise, restrictive monetary policy would allow the fomc to bring inflation down without a significant increase in the unemployment rate. this seemed like a very plausible assumption given the incredibly high vacancy rate and dearth of workers looking for jobs. our predictions contradicted standard phillips curve analysis and historical precedent, but we were in unprecedented times in 2022. it has been nearly two years since i gave that speech. how has our prediction faired? data received since then have supported our argument. since march 2022, the fomc raised the policy rate over 500 basis points and core pce inflation has fallen substantially, especially when measured over the past six months. during this dramatic tightening of policy, the job vacancy rate fell from around 7. 5 percent to 5. 3 percent, which brought the ratio of job vacancies to the number of unemployed people to a touch below 1. 4 - down from the peak of 2 and not far from the pre - pandemic level of 1. 2. the involuntary job - separation rate has remained essentially unchanged at 1 percent since april 2022. meanwhile the unemployment rate, while bouncing around a bit, is the same as it was in march 2022, 3. 7 percent, which is lower than we predicted. now, we argued that this couldn't go on forever. we showed in our research that if the vacancy rate continued to fall below 4. 5 percent there would be a significant increase in the unemployment rate. so, from now on, the setting of policy needs to proceed with more caution to avoid over - tightening. but to me, this episode shows that good theory combined with good data analysis can lead to good policy outcomes, even if the predictions challenge conventional wisdom. moving on from the labor market, another important factor affecting economic activity and progress toward the fomc's economic objectives is financial conditions, and i wanted to give my view of where they stand. there

. simply stated, the current status quo for corporate governance is unacceptable and must change. this message is applicable to both public and private companies alike and affects everyone within a company. • the message for boards of directors is : uphold your responsibility for ensuring the effectiveness of the company's overall governance process. • the message for audit committees is : uphold your responsibility for ensuring that the company's internal and external audit processes are rigorous and effective. • the message for chief executive and chief financial officers and senior management is : uphold your responsibility to maintain effective financial reporting and disclosure controls and adhere to high ethical standards. this requires meaningful certifications, codes of ethics, and conduct for insiders that, if violated, will result in fines and criminal penalties, including imprisonment. • the message for external auditors is : focus your efforts solely on auditing financial statements and leave the add - on services to other consultants. • the message for internal auditors is : you are uniquely positioned within the company to ensure that its corporate governance, financial reporting and disclosure controls, and riskmanagement practices are functioning effectively. although internal auditors are not specifically mentioned in the sarbanes - oxley act, they have within their purview of internal control the responsibility to examine and evaluate all of an entity's systems, processes, operations, functions, and activities. what are the challenges for compliance officers in the sarbanes - oxley era? first, compliance officers must help corporate risk officers and managers reinvigorate the risk assessment, internal controls, and ethical compass of the organization. recently, the fed has been looking at the fdicia 112 management reports on internal controls for several banks that have had significant breaks in internal controls. from these banks, we have identified several whose fdicia 112 processes were not effective. a closer look at these situations indicates that managements had essentially put this process on autopilot. further, the external auditors had not done effective reviews of the basis of management reports. before you say, " that could not happen at my company, " let me remind you how we started our discussion today. in each of the cases involving banks, management seemed to be content with the loss of vigor in the process and the external auditor was apparently satisfied to simply collect a fee. this is totally unacceptable. further, as the organization evolves by offering new products, changing processes, outsourcing services, complying with new regulations, or growing through mergers, the controls need