, suggests that the output gap was close to the lower end of this range. 12 however, an alternative structural approach suggests that the output gap was closer to 1¾ per cent in the fourth quarter. 13 this reflects material slack in total hours worked, as well as a level of labour productivity that is considerably below its trend. other labour market indicators also point to a greater degree of slack than the conventional measure. for potential output is the level of output that can be sustained in an economy without adding to inflationary pressures. identifying the current level of potential output is necessary to estimate the output gap, which is a key measure of inflation pressures. the conventional measure is based on the extended multivariate filter method ( see l. butler, “ the bank of canada ’ s new quarterly projection model part 4. a semi - structural method to estimate potential output : combining economic theory with a time - series filter, ” technical report no. 77, bank of canada, 1996. for a description of the structural approach, see “ appendix a : potential output ” on page 27 in the october 2013 monetary policy report. bis central bankers ’ speeches example, the proportion of involuntary part - time workers and the average duration of unemployment are still elevated ( chart 12 ). explaining the current level of core inflation with the phillips curve is not easy. simple econometric estimates of the coefficient on the output gap, b, would suggest a value of around 0. 1. conditional on our assessment of economic slack as 1¼ per cent ( the midpoint of the range ), this would predict core inflation of 1. 9 per cent. this is well above actual inflation, which is running at about 1 per cent. of course, the true coefficient b could be bigger than 0. 1. as you might expect, we have looked at this at the bank of canada. and indeed, we find that controlling for factors not captured in this simple equation could increase the coefficient to around 0. 3. 14 this produces a predicted value for core inflation of 1. 6 per cent. this is better, but it still leaves a significant portion of the weakness in inflation unexplained. given the high degree of uncertainty around real - time estimates of the output gap, it is possible that the level of economic slack is greater than currently estimated. indeed, the range we provide in the monetary policy report is designed to convey this uncertainty. however, even assuming a coefficient of 0. 3 on the output gap, we would need

focus on the impact of trade on u. s. jobs – both positive and negative – and discuss some possible policy responses. trade and jobs does opening u. s. markets to foreign producers destroy jobs at home? the expansion of trade or changes in trading patterns can indeed destroy specific jobs. for example, foreign competition has been an important factor behind declining employment in the u. s. textile industry, including in my home state of south carolina. job loss – from any cause – can create hardship for individuals, their families, and their communities. i will return shortly to the question of how we should respond to the problem of worker displacement. for now, however, i will point out that trade also creates jobs – for example, by expanding the potential market overseas for goods and services produced in the united states, as i have already discussed. trade creates jobs indirectly as well, in support of export activities or as the result of increased economic activity associated with trade. for example, gains in disposable income created by lower consumer prices and higher earnings in export industries raise the demand for domestically produced goods and services. domestic production and employment are also supported by expanded access to raw materials and intermediate goods. the u. s. jobs created by trade also tend to offer higher pay and demand greater skill than the jobs that are destroyed – although a downside is that, in the short run, the greater return to skills created by trade may tend to increase the wage differential refer also to bhagwati ( 2004 ). between higher - skilled and lower - skilled workers and thus contribute to income inequality ( bernanke, 2007 ). the effects of trade on employment must also be put in the context of the remarkable dynamism of the u. s. labor market. the amount of " churn " in the labor market – the number of jobs created and destroyed – is enormous and reflects the continuous entry, exit, and resizing of firms in our everchanging economy. excluding job layoffs and losses reversed within the year, over the past decade an average of nearly 16 million private - sector jobs have been eliminated each year in the united states, an annual loss equal to nearly 15 percent of the current level of nonfarm private employment. 6 the vast majority of these job losses occur for a principal reason other than international trade ( kletzer, 2001 ; bernanke, 2004 ). moreover, during the past ten years, the 16 million annual job losses have been more