important to take a step back and explain some of the key factors that my colleagues and i at the federal reserve consider in reaching our policy decisions. the fed has what we call a “ dual mandate, ” which are two goals set by congress : maximum employment and price stability. with these goals in mind, our focus is understanding developments that affect labor markets, inflation, and economic growth. but we also collect and analyze enormous amounts of other information, both in the form of data and reports from members of the communities we serve, to help us assess the state of the economy and inform our decision - making. the economic outlook i ’ ll start off with the most common measure of the overall economy : gross domestic product, or gdp. i expect inflation - adjusted, or real, gdp to rebound sharply this year. indeed, with strong 1 / 4 bis central bankers'speeches federal fiscal support and continued progress on vaccination, gdp growth this year could be the strongest we ’ ve seen in decades. such a robust rebound would be very welcome after the toughest period for the economy in living memory and a winter where the pandemic has been particularly severe. the resurgence of covid - 19 over the past few months caused consumers to pull back on spending, resulting in significant job losses in some sectors — especially in leisure and hospitality. in past recessions, we have typically seen a decline in manufacturing jobs, while the service sector — establishments like hotels, bars, and restaurants — was not affected to the same extent. but the pandemic has flipped the script in that regard. indeed, this time, both the manufacturing and housing sectors have rebounded sharply since last spring, while much of the service sector remains depressed. the pandemic has had a truly devastating effect on employment. overall, as of january of this year, we are down nearly 10 million jobs from the pre - pandemic level, a greater shortfall than we saw even at the worst point of the aftermath of the great recession. locally, we ’ ve experienced considerable strain, given that much of new york city ’ s economy hinges on the leisure and hospitality industry. job losses have been dramatic : new york was hardest hit at the start of the pandemic, and almost a year later the data still show a city under stress. while national employment was 7 percent below pre - pandemic levels at the end of 2020, employment in new york city was 12 percent lower. 1 i hope that as workers return

policy coordination in areas such as fiscal policy. putting all the countries using the euro on a clearly sustainable fiscal path would help restore market confidence. assuming that europe ultimately succeeds in managing this situation, a stronger union will emerge that will be viewed as more robust and resilient. this would be a welcome development for the u. s. if, in contrast, europe were not to be fully successful in charting an effective course, this could have a number of negative implications for the u. s. in particular, there are three possibilities that i would like to highlight for the subcommittee today. first, if the european situation were to deteriorate, then the euro area would face even more serious fiscal and economic challenges. as a result, growth within the euro zone would bis central bankers ’ speeches weaken and this would lead to less demand for u. s. goods and services that are exported to europe from companies and workers here. this would hurt growth here in the united states and would have a negative impact on u. s. jobs. it is important to recognize that the euro area is the world ’ s second largest economy after the u. s. and an important trading partner for us. also, europe is a significant investor in the u. s. economy, and vice versa. thus, what happens in europe has significant implications for our economy. second, if the european situation were to deteriorate, this could put pressure on the u. s. banking system. the good news is that u. s. banks are much more robust and resilient than they were a few years ago. u. s. banks have bolstered their capital significantly, built up their loan loss reserves and have significantly larger liquidity buffers. also, the direct exposures of u. s. banks to the countries in europe that are facing the most intense fiscal challenges are actually quite modest. the bad news is that the exposures of the u. s. banks climb quite sharply when one also considers the exposures to the core european countries and to the overall european banking system. this means that if the crisis were to broaden further and intensify, this could put greater pressure on u. s. banks ’ capital and liquidity buffers. third, if the european situation were to deteriorate further, financial markets would likely become more stressed. this could tighten the availability of credit to u. s. households and businesses. it could also cause equity prices to fall and this would