more persistent factors also continue to restrain the pace of recovery. consequently, the federal open market committee ( fomc ) now expects a somewhat slower pace of economic growth over coming quarters than it did at the time of the june meeting, when committee participants most recently submitted economic forecasts. consumer behavior has both reflected and contributed to the slow pace of recovery. households have been very cautious in their spending decisions, as declines in house prices and in the values of financial assets have reduced household wealth, and many families continue to struggle with high debt burdens or reduced access to credit. probably the most significant factor depressing consumer confidence, however, has been the poor performance of the job market. over the summer, private payrolls rose by only about 100, 000 jobs per month on average – half of the rate posted earlier in the year. 1 meanwhile, state and local the figure of 100, 000 private jobs per month adjusts for the effects of the two - week strike by communications workers at verizon, which held down measured payrolls in august. bis central bankers ’ speeches governments have continued to shed jobs, as they have been doing for more than two years. with these weak gains in employment, the unemployment rate has held close to 9 percent since early this year. moreover, recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead. other sectors of the economy are also contributing to the slower - than - expected rate of expansion. the housing sector has been a significant driver of recovery from most recessions in the united states since world war ii. this time, however, a number of factors – including the overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of “ underwater ” mortgages ( on which homeowners owe more than their homes are worth ) – have left the rate of new home construction at only about one - third of its average level in recent decades. in the financial sphere, as i noted, banking and financial conditions in the united states have improved significantly since the depths of the crisis. nonetheless, financial stresses persist. credit remains tight for many households, small businesses, and residential and commercial builders, in part because weaker balance sheets and income prospects have increased the perceived credit risk of many potential borrowers. we have also recently seen bouts of elevated volatility and risk aversion in financial markets

than $ 600 billion, reflecting the improvement in financial conditions that has already occurred. in addition, bank reserves held at the fed will decline as the longer - term assets that we own mature or are prepaid. nevertheless, should economic conditions warrant a tightening of monetary policy before this process of unwinding is complete, we have a number of tools that will enable us to raise market interest rates as needed. perhaps the most important such tool is the authority that the congress granted the federal reserve last fall to pay interest on balances held at the fed by depository institutions. raising the rate of interest paid on reserve balances will give us substantial leverage over the federal funds rate and other short - term market interest rates, because banks generally will not supply funds to the market at an interest rate significantly lower than they can earn risk free by holding balances at the federal reserve. indeed, many foreign central banks use the ability to pay interest on reserves to help set a floor on market interest rates. the attractiveness to banks of leaving their excess reserve balances with the federal reserve can be further increased by offering banks a choice of maturities for their deposits. but interest on reserves is by no means the only tool we have to influence market interest rates. for example, we can drain liquidity from the system by conducting reverse repurchase agreements, in which we sell securities from our portfolio with an agreement to buy them back at a later date. reverse repurchase agreements, which can be executed with primary dealers, government - sponsored enterprises, and a range of other counterparties, are a traditional and well - understood method of managing the level of bank reserves. if necessary, another means of tightening policy is outright sales of our holdings of longer - term securities. not only would such sales drain reserves and raise short - term interest rates, but they also could put upward pressure on longer - term interest rates by expanding the supply of longerterm assets. in sum, we are confident that we have the tools to raise interest rates when that becomes necessary to achieve our objectives of maximum employment and price stability. fiscal policy our economy and financial markets have faced extraordinary near - term challenges, and strong and timely actions to respond to those challenges have been necessary and appropriate. i have discussed some of the measures taken by the federal reserve to promote economic growth and financial stability. the congress also has taken substantial actions, including the passage of a fiscal stimulus package. nevertheless, even as important steps have been taken to address the recession