time. 3 how much of this decline is just a particularly bad business cycle, and how much represents a long - run downshift? to get at that question, let ’ s take a deeper look at the growth slowdown. we can think of economic growth as coming from two sources : more hours worked ( labor supply ) or higher output per hour ( productivity ). hours worked mainly depends on growth in the labor force, which has been slowing since the mid2000s as the baby - boom generation ages. as you can see, the labor force is now growing at only about 0. 5 percent per year ( figure 9 ). another way to see this is through the sustained increase in the ratio of people over 65 to those who are in their prime working years ( figure 10 ). this long - expected demographic fact has now arrived, and it has challenging implications for our potential growth and also for our fiscal policy. 4 the unexpected part of the growth slowdown reflects weak productivity growth rather than lower labor supply. labor productivity has increased only 1 / 2 percent per year since 2010 - - the smallest five - year rate of increase since world war ii and about one - fourth of the average postwar rate ( figure 11 ). the slowdown in productivity has been worldwide and is evident even in countries that were little affected by the crisis ( figure 12 ). given the global nature of the phenomenon, it is unlikely that u. s. - specific factors are mainly responsible. see jerome h. powell ( 2016 ), “ recent economic developments, the productive potential of the economy, and monetary policy, ” speech delivered at the peterson institute for international economics, washington, d. c., may 26, www. federalreserve. gov / newsevents / speech / powell20160526a. htm. congressional budget office ( 2016 ), the 2016 long - term budget outlook, ( washington : cbo, july ), www. cbo. gov / sites / default / files / 114th - congress - 2015 - 2016 / reports / 51580 - ltbo. pdf. - 7a portion of the productivity slowdown is undoubtedly due to low levels of investment by businesses. the financial crisis and the great recession left firms with excess capacity, reducing incentives to invest. if businesses expect slower growth to continue, that will also hold down investment. the other important factor is the decline in what economists call total factor productivity, or tfp, which is the part

financial risk to the banking system and does not justify a shift in prioritization. while some may view this position as provocative, my goal is to demonstrate a more foundational point - mis - prioritizing supervisory objectives will have consequences, making banks riskier and the u. s. financial system less resilient over time. regulatory reform when it comes to regulatory reform efforts, we should acknowledge, as a starting point, that the bank regulatory system has undergone significant transformation since the passage of the dodd - frank act, in response to the 2008 financial crisis. this has resulted in significantly increased liquidity and bank capital, new stress testing and resolution planning requirements, and several other improvements designed to promote bank resiliency. not only the quantum, but the quality, of bank capital has also improved. common equity tier 1 capital is now codified as the highest quality form of regulatory capital and is included within a capital framework that already includes goldplating over international capital standards. measured against this baseline of resiliency, we need to carefully assess the need for regulatory improvements, while maintaining those elements of the bank regulatory framework that have proven durable and successful over time. i have not previously argued nor am i arguing today that the regulatory framework is perfect and beyond reproach. or that there is no room for improvement or evolution over time. where we find opportunities for needed improvements - either to maintain the system's 6 / 9 bis - central bankers'speeches effectiveness or respond to identified weaknesses - we should make those changes. but these changes should be motivated by a clear - eyed assessment of the facts, if the goal is to achieve changes that are focused, efficient, and durable over the long run. before proposing regulatory reform measures to remediate or address issues identified during the spring 2023 banking stress, we should first reflect on the causes that contributed to the failures of svb and signature bank. these bank failures were followed by government intervention in the form of a guarantee on uninsured deposits at these institutions, and the creation of a broad - based emergency lending facility - the bank term funding program - designed to reassure the market about the underlying strength of the u. s. banking system. other characteristics of these bank failures - the rapid pace of depositors withdrawing uninsured deposits - appeared to deviate from the patterns seen in prior bank failures ( in degree, if not in kind ). but many of the core problems of these banks stemmed from well - known, core banking risks