james mcandrews : the economy and the household debt and credit report remarks by mr james mcandrews, executive vice president and director of research of the federal reserve bank of new york, at the household debt and credit press briefing, new york city, 28 february 2013. * * * good morning and welcome to the new york fed. i am pleased to have this opportunity to talk with you about some of the exciting research we are doing here at the bank. this morning my remarks will focus on national economic conditions and then i will introduce our special presentation today on household debt and credit conditions. what i have to say reflects my own views and not necessarily those of the federal reserve bank of new york or the federal reserve system. national economic conditions it has been three and one half years since the end of the “ great recession. ” but, the pace of this expansion so far remains very sluggish compared with previous post - world war ii business cycles : the level of real gross domestic product ( gdp ) in the fourth quarter of 2012 was only around 2½ percent above its previous peak in the fourth quarter of 2007. to put this into perspective, at this point in time following recessions in 1973, 1981, 1990 and 2001, the level of real gdp ranged from 14 percent to 18 percent above the previous cyclical peak. after falling by 3. 1 percent in 2009, growth in real gdp averaged 2. 4 percent in 2010, 1. 8 percent in 2011 and 2. 2 percent in 2012, a consistent but sluggish pace. this sluggishness has been quite evident in the labor market. after falling by 421, 000 per month in 2009, payroll employment grew by 85, 000 per month in 2010, 175, 000 per month in 2011, and 181, 000 in 2012. to put these numbers in perspective, the trend rate of growth of the civilian non - institutional population is around 200, 000 per month. the unemployment rate has declined from a peak of 10 percent in october of 2009 to just under 8 percent recently, due largely to the fact that the labor force participation rate has declined by considerably more than would be suggested by underlying demographic trends. fortunately, long - term unemployment, defined as those unemployed for 15 weeks or longer, has declined from nearly 9 million in the first quarter of 2010 to about 6. 6 million in recent months – a decline of 28 percent. the median duration of unemployment has declined from 23 weeks in the second quarter of 2010

management risk tolerance level ; the set of monitoring tools institutions use for assessing their liquidity risk ; the robustness of stress tests scenarios and the extent to which they reflect luxembourg idiosyncrasies ; the size and composition of local liquidity buffers ; the internal consistency of banks ’ contingency funding plans and where applicable ; intra - day liquidity management. in addition, the bcl also pays attention to the soundness of the business model and the balance sheet structure of local credit institutions and in particular to possible liquidity risks that are being transferred from foreign - based banking groups to local subsidiaries. in this regard, some degree of liquidity management at the local level plays a significant role in the bcl liquidity risk assessment of banks, and it must be subject to its approval. finally, the bcl pays particular importance at assessing whether banks ’ internal pricing of liquidity within the institution and among group member duly reflects liquidity risk. but even these tools and procedures are not enough. the bcl liquidity surveillance framework includes a combination of qualitative and quantitative elements. on - site visits are an important component of the bcl monitoring framework in order to assess business models and the liquidity situation and the risk management framework of credit institutions. in the absence of a formal mou, the bcl surveillance visits are nevertheless coordinated and conducted with the commission de surveillance du secteur financier. since 2009, 14 on - site visits have been performed, and a similar number is expected to take place over the coming year. another pillar of the bcl liquidity framework is off - site surveillance. while structural liquidity risk may be monitored and analyzed through information provided by financial institutions ( prudential and statistical reporting requirements ), by the micro - prudential approach or even by market intelligence, the bcl endeavors to have timely cash - flow based liquidity projections from market participants on a short - term basis. at the moment, 45 financial institutions which are important from a financial stability and a monetary policy perspective, provide a forward - looking daily liquidity reporting that includes a five - day forecast. the forward - looking nature of indicators is at a premium given the sudden realization of liquidity risk. this is the reason for the bank ’ s analysis and close interaction with the industry in all aspects regarding the two liquidity ratios of basel iii and the monitoring tools proposed such as maturity ladder reporting, funding concentration, and the availability of unencumbered assets. another key