puerto rico and the u. s. virgin islands both remain mired in economic difficulties with no clear signs of a revival. while the post - crisis expansion is now the third - longest on record, by historical standards it has been marked by a relatively weak pace of growth, with annual gdp growth averaging just 2. 1 percent since mid - 2009. wage growth has also been comparatively modest even as unemployment has declined. in part, this likely reflects the fact that productivity growth has been sluggish compared to historical experience. relative income differences are likely to get more attention when economic growth is weak and people do not see significant improvement in their absolute income levels. with that in mind, as we consider how to address the issues of income inequality and mobility, we should also consider how to improve flagging productivity growth, because that would help raise the level of household income. wage inequality today ’ s briefing will focus on labor market inequality, including wage inequality in our region. 1 / 4 bis central bankers'speeches currently, we see comparatively high levels of inequality in the labor market in terms of differences in the wages workers earn. this situation has been in the making for several decades. since the early 1980s, wages have increased more rapidly for workers toward the top of the income distribution than for the median worker, and much more rapidly than for workers toward the bottom of the distribution. further, this increase in inequality can be seen throughout the entire distribution of wages. in my view, two main factors are responsible for this pattern of differential wage growth and the resulting increase in wage inequality. first, advances in technology have dramatically changed the nature of work, increasing the skill requirements for many jobs while displacing others. second, the pace of globalization has accelerated in recent decades, with increased crossborder trade, investment, immigration, and the emergence of global supply chains. together, these economic forces have contributed to significant job losses in certain sectors, most notably manufacturing. the resulting decline in demand for middle - and lower - skilled workers has resulted in fewer jobs and has depressed wages for many in those industries. other, less important factors behind the rise in inequality include the decline in private sector labor unions and the falling real value of the minimum wage. at the same time, technological change and globalization have created jobs in areas such as engineering and software development. demand has been particularly high for knowledge workers, resulting in strong wage growth in certain sectors. all told, the forces of technological change and globalization have contributed to wage

and this is capping the demand for u. s. exports. on the brighter side, some of these headwinds appear to be subsiding. employment growth has picked up somewhat, which should eventually lead to faster household formation and more demand for housing. u. s. banks are healthier so that credit conditions, while still tight, are gradually easing. and, households appear quite far along in the deleveraging process by a number of important measures. for example, the ratio of household debt service relative to income is back to levels last seen in the early 1990s. for these reasons, i expect that growth will gradually strengthen over the next few years. nevertheless, significant downside risks remain, especially those related to the challenges in europe and how the potential “ fiscal cliff ” in the united states will be resolved after the fall elections. even if these risks do not materialize, i anticipate only slow progress toward full employment. bis central bankers ’ speeches on the inflation side, in recent years our forecasts have been noticeably more accurate than on the growth side, and we have succeeded in delivering inflation very close to our 2 percent price stability objective. through march, as measured by the personal consumption expenditures deflator, overall consumer prices have risen 2. 1 percent over the past 12 months, and prices excluding food and energy have risen 2. 0 percent. but price trends have been a bit stickier than one might have anticipated given the large amount of slack in the economy. to some degree, this likely reflects the anchoring exerted by stable inflation expectations. but some of the price pressures can be attributed to other, more temporary, factors : higher oil and gasoline prices and their pass - through into the costs of other goods and services. upward pressure on imputed homeowners rents due to increased demand for rental housing. higher import prices for goods, such as apparel. this reflects many factors including commodity prices pressures and higher wage inflation in countries such as china. some of these upward pressures on inflation appear to be fading. oil and gasoline prices have fallen in recent months. apparel price inflation should gradually ease, given the sharp drop seen in cotton prices. owners ’ equivalent rent should also eventually stabilize as multi - family construction picks up and programs that shift real estate owned by banks to investors so they can be rented gear up. more generally, there are several reasons to think that inflation will remain moderate and close to our objective. first, and most obviously, the economy continues to