changes, and so we can get a better read on what is cyclical and what is structural. prime - age and young workers are those who remain underemployed, while the contribution of older workers to the labour gap is close to zero ( chart 3 ). another measure we use is the labour market indicator ( lmi ), which we started publishing on a regular basis this year. this indicator shows that the overall labour market has more room in the parlance of the 1960s and 1970s, we are seeing a divergence from okun ’ s law, which holds there is a negative statistical relationship between growth and unemployment. okun ’ s law is named for economist arthur okun who, in the early 1960s, showed that in the united states, unemployment tended to fall by 1 percentage point for every three percentage point rise in gdp. t. macklem, “ information and analysis for monetary policy : coming to a decision, ” bank of canada review ( summer 2002 ) : 11 – 18. monthly net job creation was about 10, 000 in 2014, roughly 3, 500 lower than what would be consistent with growth in potential. the integrated framework ( if ) is based on the growth - accounting framework that decomposes potential gdp into contributions coming from trend labour input ( hours worked ) and trend labour productivity ( output per hour worked ). on the trend labour input side, the if uses an empirical model that largely depends on demographic developments, as well as other factors such as school enrolment and disincentives linked with employment insurance. on the trend labour productivity side, the approach links the capital stock with investment to identify trend capital deepening and uses a combination of filters and detailed analysis of variables such as investment in machinery and equipment and research and development to estimate trend total factor productivity. l. pichette, p. st - amant, b. tomlin and k. anoma, “ measuring potential output at the bank of canada : the extended multivariate filter and the integrated framework, ” discussion paper no. 2015 – 1, bank of canada, january 2015. the estimate of 270, 000 jobs corresponds to approximately 1. 5 per cent of the bank ’ s structural estimate of trend employment in 2014q4. bis central bankers ’ speeches for improvement than the headline unemployment rate would suggest. 8 the unemployment rate is currently close to its post - recession low of about 6 1 / 2 per cent, while the lmi has fluctuated in a narrow range

- term deposits with embedded derivatives tailored to the needs of investors. taking into account the effects of financial innovation is a clear challenge for monetary analysis. meeting this challenge requires regularly updated tools and in - depth research based, in particular, on sectoral analysis. 2. by affecting the transmission mechanism, financial innovation is also a challenge for the conduct of monetary policy a good knowledge of the mechanisms through which monetary policy affects the economy is of crucial importance for central banks. financial innovation affects these mechanisms both by altering the channels through which monetary policy operates and by changing the overall impact of monetary policy decisions. but the magnitude of the changes and the precise effect due to financial innovation at a time when other factors such as globalisation are at work are not well known. at the present juncture research shows that financial innovation tends to strengthen the interest and exchange rate channels whereas it appears to weaken the credit channel. - financial innovation certainly contributes to stronger wealth effects and thus probably also to strengthen interest rate channel 7. this can be explained as follows : • financial innovation fosters faster dissemination of information and its more rapid incorporation into financial market prices. this is of course particularly true for monetary policy decisions and can therefore increase the effectiveness of monetary policy, particularly via the interest rate channel 8. • financial innovation contributes to an increased holding of financial assets by lowering transaction costs and facilitating arbitrage, hedging, funding and investment strategies. • financial innovation often relies on stronger leverage, increasing the effect of interest rate change by the central bank. one example of this enhanced impact is provided by the behaviour of hedge funds who customarily borrow short - term funds to finance their ( longer - term ) investments 9. - turning to the exchange rate channel, financial innovation results in greater integration of domestic and international financial markets, which should also strengthen the exchange rate channel as exchange rates become more sensitive to interest rate differentials between currency areas. this has been illustrated by the recent debate about cross - border carry trades 10. - at the same time, financial innovation has probably weakened the credit channel 11. several phenomena may be at play : • financial innovation gives firms broader access to securities markets, which may reduce information asymmetries at the source of the credit channel. bis, 1994 noyer, 2001 weber, 2007 weber, 2007 bis, 1994 ; thornton, 1994 • more specifically, securitisation by banks has reduced their liquidity constraints and thus further weakened the credit channel. a recently published research paper by the new york