and predictable, households and firms can plan more securely for the future. the perception of reduced risk encourages investment. low inflation also exerts a discipline on costs, fostering efforts to enhance productivity. productivity is the ultimate source of rising standards of living, and we witnessed a notable pickup in this measure in the past two years. the robust economy has facilitated the efforts of the congress and the administration to restore balance in the unified federal budget. as i have indicated to the congress on numerous occasions, moving beyond this point and putting the budget in significant surplus would be the surest and most direct way of increasing national saving. in turn, higher national saving, by promoting lower real long - term interest rates, helps spur spending to outfit american firms and their workers with the modern equipment they need to compete successfully on world markets. we have seen a partial down payment of the benefits of better budget balance already : it seems reasonable to assume that the decline in longer - term treasury yields last year owed, in part, to reduced competition - current and prospective - - from the federal government for scarce private saving. however, additional effort remains to be exerted to address the effects on federal entitlement spending of the looming shift within the next decade in the nation ’ s retirement demographics. as i noted earlier, our nation has been experiencing a higher growth rate of productivity - - output per hour worked - - in recent years. the dramatic improvements in computing power and communication and information technology appear to have been a major force behind this beneficial trend. those innovations, together with fierce competitive pressures in our high - tech industries to make them available to as many homes, offices, stores, and shop floors as possible, have produced double - digit annual reductions in prices of capital goods embodying new technologies. indeed, many products considered to be at the cutting edge of technology as recently as two to three years ago have become so standardized and inexpensive that they have achieved near “ commodity ” status, a development that has allowed businesses to accelerate their accumulation of more and better capital. critical to this process has been the rapidly increasing efficiency of our financial markets - - itself a product of the new technologies and of significant market deregulation over the years. capital now flows with relatively little friction to projects embodying new ideas. silicon valley is a tribute both to american ingenuity and to the financial system ’ s ever - increasing ability to supply venture capital to the entrepreneurs who are such a dynamic force in our economy. with new high

, and risks are to the downside. the pace of improvement may slow if a large portion of the easiest gains from the lifting of mandated closures and easing of capacity constraints has already occurred. moreover, weekly covid case counts have been rising, and some states are ramping up restrictions. these developments mostly occurred after the reference period for the june employment report. after declining at a fast clip through early june, initial claims for unemployment insurance have moved roughly sideways in recent weeks and remained at a still elevated level of 1. 3 million in the week ending july 4. 5 some high - frequency indicators tracked by federal reserve the flattening out seen in recent weeks is even clearer when looking at nonseasonally adjusted claims numbers, which might be a slightly better measure than seasonally adjusted numbers in the current environment. the usual seasonal adjustment procedure, which relies on multiplicative seasonal factors, is not ideally suited to the current extraordinary circumstances. see jason bram and fatih karahan ( 2020 ), “ translating weekly jobless claims into monthly net job losses, ” federal reserve bank of new york, liberty street economics ( blog ), may 7, https : / / libertystreeteconomics. newyorkfed. org / 2020 / 05 / translating - weekly - jobless - claims - into - monthlynet - job - losses. html. in addition, the department of labor stated that 49 states reported about 1 million initial claims for pandemic unemployment assistance ( pua ) in the week ending july 4. however, since most pua applicants must first apply for, and be denied, regular state unemployment insurance ( ui ) benefits before they apply for pua, initial pua claims and initial claims for regular ui benefits will be strongly correlated ( likely with some lag ) and do not constitute independent measures of the number of unemployed persons seeking unemployment benefits. - 4board staff ( including mobility data and employment in small businesses ) suggest that the strong pace of improvement in may and the first half of june may not be sustained. the pandemic ’ s harm to lives and livelihoods is falling disproportionately on black and hispanic families. after finally seeing welcome progress narrowing the gaps in labor market outcomes by race and ethnicity in the late stage of the previous recovery, the covid shock is inflicting a disproportionate share of job losses on african american and hispanic workers. according to the current population survey, the number of employed persons fell