borrowing to maintain consumption while income growth slowed, households today, at least in the aggregate, are well positioned to maintain or even increase consumption relative to gains in income. to me, at this stage in the business cycle, a historically high household saving rate is a tailwind for the economy, not a headwind. and, of course, recent reductions in personal income tax rates are also a tailwind for the economy. productivity and investment data provide another vantage point from which to assess both the demand and supply sides of the current expansion. over the past few years, we have seen some pickup in productivity growth, albeit from a very depressed pace. by contrast, at a comparable stage in both the 2001 – 07 and 1982 – 90 economic expansions, productivity growth ( as measured by an eight - quarter moving average ) was actually slowing relative to its contemporaneous peak - to - present pace. i should also note that this recent pickup in productivity has coincided with a rebound in business investment, and that this increase in capital spending has been evident in both the equipment and intellectual property categories ; it is not just an “ oil patch ” story. business investment is being supported by recent changes in the tax code that lower the cost of capital as well as by 1 / 4 bis central bankers'speeches continued strong profitability of u. s. companies. while capital investment is one important source of productivity growth and recent data on this front are encouraging, predicting future or even identifying past inflection points in productivity growth is notoriously difficult. although it may be tempting simply to extrapolate a decade of disappointing productivity data into a distant future, a pickup in trend productivity growth is a possibility that deserves close monitoring. 2 let me now turn to the job market and inflation outlook. average monthly job gains continue to outpace the increase needed to provide jobs for new entrants to the labor force over the longer run. at 3. 7 percent in september, the unemployment rate has not been this low since 1969. in addition, after remaining stubbornly sluggish throughout much of the expansion, wage growth is picking up. a sustained rise in inflation - adjusted, or “ real, ” wages at or above the pace of productivity growth is typical in an economy operating in the vicinity of full employment, and we are starting to see some evidence of this. i certainly hope it continues. now, some might see a rise in wages as leading to upside inflationary pressures, but here, again, the experience

richard h clarida : outlook for the us economy and monetary policy speech by mr richard h clarida, vice chairman of the board of governors of the federal reserve system, at the peterson institute for international economics, washington dc, 25 october 2018. * * * i see some familiar faces in the audience, and i am delighted to be at peterson today to offer my first public remarks since being sworn in last month as vice chairman of the federal reserve board. as some of you know, i have been a student of u. s. monetary policy for more than 30 years. so, for me, personally, it is a distinct honor and real privilege to have the opportunity to serve with my colleagues on the board of governors and, along with the 12 reserve bank presidents, on the federal open market committee ( fomc ). now, of course, i fully realize that i have participated in just one fomc meeting to date, so my remarks today will not come with a patina earned from long experience as a monetary policymaker. that said, i thought it might be of interest to share my thinking on the current state of the u. s. economy, to explain how it informed my support for the fomc ’ s policy decision last month, and to discuss my views on the way forward for u. s. monetary policy. 1 the economic expansion in year 10 the u. s. economic expansion, now in its 10th year, is marked by strong growth in the gross domestic product ( gdp ) and a job market that has been surprising on the upside for nearly two years. it is impossible today to know with much precision how much of the pickup in growth and the decline in unemployment that we have seen over the past two years is structural and how much is cyclical. most likely, both factors are at work. that said, based on my reading of the accumulating evidence, i believe that trend growth in the economy may well be faster and the structural rate of unemployment lower than i would have thought several years ago. let me elaborate. first, let ’ s look at the demand side of the economy. consider the benchmark revisions to the household saving rate. recently revised commerce department data now show that the aggregate household saving rate is running at 6. 7 percent of disposable income. this revised estimate is nearly double the previous estimate. the higher level suggests that, in contrast to the previous economic expansion from 2001 to 2007, when households were