counties. reducing poverty is a major challenge for policymakers. the new york fed ’ s measures of regional credit conditions suggest continued financial challenges for families here. as of the second quarter of 2012, for those people with a credit report, average debt per person in new jersey was about $ 63, 000, roughly unchanged over the past several years. delinquency rates on that debt are high : 8. 4 percent of all debt in the state is seriously delinquent, up from 7. 4 percent in 2011 and above the national rate of 6. 7 percent. so, many new jersey households are still struggling with their finances. although there are some recent signs that home prices in the state are starting to firm, nevertheless, the housing crisis continues to take a toll on our homeowners. as of june, 9. 3 percent of all mortgage debt in new jersey was 90 - plus days delinquent, three percentage points above the national rate. and that delinquency rate is actually a little higher here in northern new jersey. national economic conditions the performance of the u. s. economy since the end of the recession in 2009 has been disappointing. real gdp has grown at an annual rate of just over 2 percent over this period, and it was even slower in the first half of 2012. as a result, employment gains have been modest, unemployment remains above 8 percent – an unacceptably high level – and participation in the jobs market remains depressed. moreover, about 5 million workers have been unemployed for six months or more. this is important because long - term bis central bankers ’ speeches unemployment can cause job skills to atrophy making it more difficult for such people to find jobs in the future. while the good news is that the job - finding rates of the long - term unemployed have not yet deteriorated as many feared, we ought not to take this for granted going forward. although energy prices have begun to rise again, total inflation, as measured by year - overyear changes of the consumer price index, is still around 1¾ percent – less than half the rate in september of 2011. in recent months, core inflation has also slowed and it is now also under 2 percent. higher energy and grain prices mean that headline inflation will likely edge somewhat higher for a few months before moving slightly lower again. but measures of the underlying rate of inflation are moderate, wage gains remain subdued, and longer - term inflation expectations are fully consistent with our longer run inflation objective of

2 per cent as measured by the personal consumption expenditures ( pce ) deflator. near term, the economic outlook is that the growth pace is likely to remain disappointing. on the positive side, motor vehicle sales in august increased solidly. nevertheless, retail sales outside of autos and gasoline were soft in august as households continue to be cautious. one brighter spot has been the housing market. housing starts and sales of new and existing single - family homes are trending up gradually. nationally, home prices have stabilized and begun to rise modestly after falling roughly 30 percent from their 2006 peak. housing market conditions still vary significantly across the country with the worst performing counties experiencing annual house price declines of 8 percent or more. this sector is just getting back on its feet, so that even strong gains in the residential investment sector from its current tiny base will provide only a modest contribution to overall gdp growth. in addition, homeowner net worth remains much below its pre - crisis level. the near - term outlook for the business sector is particularly worrisome right now. new orders for nondefense capital goods and information on business plans for spending on new structures both suggest weakness in business fixed investment. also, many indicators point to sluggish manufacturing activity, including the ism manufacturing composite index, several regional manufacturing surveys, and august industrial production. our own empire state manufacturing survey fell deeper into negative territory in september. this manufacturing slowdown stems from several factors, including the slowdown in the pace of growth abroad and uncertainties about how the fiscal cliff in washington will be resolved. so why has the economy grown so slowly since the official end of the “ great recession? ” there are many reasons, but i would cite five factors as particularly important : • access to credit. although credit availability is slowly improving, it remains impaired, especially for households with less - than - sterling credit histories and for some small businesses. • balance sheet repair. although substantial progress has been made, many households still need to rebuild their net worth following the housing bust. more than 20 percent of homeowners with a mortgage are “ underwater ” – meaning they owe more on their home than it can be sold for. • fiscal drag. state and local governments have been cutting spending for over two and half years and federal government spending is also contracting. while fiscal consolidation is essential over the medium to long term, spending cuts reduce demand and are a drag on near - term growth. • risks relating to europe. the