william c dudley : beyond the macroeconomy remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the economic press briefing, federal reserve bank of new york, new york city, 4 november 2015. * * * aysegul sahin and joseph tracy assisted in preparing these remarks. good afternoon and welcome once again to the federal reserve bank of new york ’ s economic press briefing. i am pleased to have this opportunity to speak with you. today i want to focus on how economic outcomes often differ substantially across different segments of the population. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. the federal reserve has a dual mandate of maximum employment and price stability. while these mandates are expressed at an aggregate national level, it is important for policymakers to understand how they impact different groups of individuals across the country. consequently, in addition to monitoring macroeconomic conditions closely on a day - to - day basis, economists at the new york fed have been doing a substantial amount of work to understand how economic experiences differ across individuals and regions. as highlighted by the nobel prize committee ’ s recent recognition of professor angus deaton ’ s work, analyzing individual outcomes is vital to fully understanding the workings of the macroeconomy. with that in mind, i want to talk about two important areas that impact household well - being : labor income and housing opportunities. let me start with labor income, which for most households is the dominant source of household income. as one would expect, differences in labor income across individuals of a given age tend to increase as people get older. some of this is due to education and occupation choices – and how they impact income growth ― and some is due to various events that individuals face in their working lives. unemployment risk is an example of an adverse development that can substantially affect people ’ s careers and labor income during their lifetime. over the period from 1976 to 2015, the overall unemployment rate averaged around 6. 5 percent, but unemployment varied substantially across regions and across worker backgrounds. unemployment was especially high for workers with lower earnings, a group that tends to have little savings to draw upon. looking across demographic groups, younger workers, less - educated workers and those in manual occupations, as well as workers who identify as black or hispanic, experienced significantly higher average unemployment rates when compared to older and college - educated workers.

is how big a footprint the facility should have in terms of volume. to the extent that the overnight rrp rate were set very close or equal to the interest rate on excess reserves ( ioer ) without caps, then this might result in a large amount of disintermediation out of banks through money market funds and other financial intermediaries into the facility. this could encourage further development of the shadow banking system. if this were deemed undesirable, this would argue for a wider spread between the overnight rrp and the ioer in order to reduce the volume of flows into the facility. the second issue is the facility ’ s potential impact on financial stability. in particular, would such a facility make financial instability less likely? and, when financial stress did occur, would such a facility amplify or dampen financial strains? on the first point, it seems that such a facility would tend to make financial instability less likely. the overnight rrp facility allows us to make a short - term safe asset more widely available to a broad range of financial market participants. the provision of short - term safe assets by the official sector might crowd out the private creation of runnable money - like liquid assets. this might enhance financial stability by reducing the likelihood of a financial crisis. however, if a financial crisis were to occur, the existence of a full allotment, overnight, rrp facility might exacerbate instability by encouraging runs out of more risky assets into the facility. that is because the supply of a full allotment facility would be completely elastic at the given fixed rate. money market mutual funds and other providers of short - term financing could rapidly shift funds into the facility away from assets such as commercial paper that support the private sector. in contrast, in the current regime, when financial crises lead to flows into less risky assets, their interest rates fall, limiting the appetite for these less risky assets. consequently, under a full allotment setup, runs could be larger and these runs could the floor has been more solid since the testing was extended in january for a full year. in part, this is likely because the extension allowed market participants to plan ahead knowing that they could rely on the facility. raising the caps has also been a factor in solidifying the floor. bis central bankers ’ speeches exacerbate the fall in the prices of riskier assets. note that the risk here is how quickly financial flows could reverse from one day to the next, not