real - time uncertainty surrounding the estimates of structural unemployment and potential output growth – the two key metrics to measure slack in the labour market and in the economy more generally. in 2013, the commission estimated that in the euro area the nawru – a rough measure of structural unemployment – was likely to have increased from pre - crisis levels of around 8. 5 % to 11. 6 %. 7 estimates of other institutions have been revised likewise. currently, the commission estimates that the nawru in the euro area is closer to 8. 4 %, compared with an actual unemployment rate of 8. 5 %. you can see the same pro - cyclical pattern for real - time estimates of potential growth on the righthand side. in 2007, just before the outbreak of the financial crisis, the european commission estimated that potential growth two years ahead would be above 2 %. in 2010, in the aftermath of the crisis, it estimated the rate to be below 1 % for the same year. there are two competing and very different hypotheses that could explain the sort of revisions we see in the data, which relate to the two types of supply and demand interactions i outlined at the beginning. 8 one is the “ hysteresis view ” that we have experienced structural changes on the supply side of the economy in both directions during the crisis. the lows of the crisis years were, at the time, thought to represent a “ new normal ” of low growth and secular stagnation that only determined policy action could overcome. now, some believe that structural reforms coupled with abovepotential growth are healing the scars of the crisis. 2 / 7 bis central bankers'speeches the implication of this view is that, as the global expansion strengthens, supply is expanding in tandem with demand and the output gap does not close. that is, we are chasing a moving target of potential output that keeps inflationary pressures in check. the other view is that, during the crisis, potential growth never fell by as much as what canonical estimates would tend to suggest in the first place, and that these estimates may have mistaken temporary shocks for more permanent ones. a crude reference point for understanding the consequences of this second hypothesis is to look at trend real gdp growth over a long period of time, abstracting from any models and their underlying assumptions. you can see this on my next slide, starting in 1970. the chart on the left - hand side would tend to confirm the traditional view of the business cycle

across a broad range of financial services and were especially strong in the area of " financial management services, " which includes activities such as check clearing, cash management, letters of credit, and credit card processing. according to the surveys, community banks remain an important provider of these services, albeit in an increasingly competitive marketplace. among small businesses that reported using a bank or thrift in 2003, about 37 percent used a community bank, down from about 42 percent in 1998. over the same period, the share of small businesses using a financial service supplied by a nondepository institution rose from 40 percent to 54 percent. although these surveys show that community banks face increasing competition, including from nondepository providers, they also highlight the importance of one of the traditional strengths of community banks : local presence. for example, in 2003 the median distance between a small business's headquarters and its bank or thrift was three miles, about the same as in 1998. indeed, part of the success of nondepository institutions may have been due to the fact that the median distance between a small - business customer and its nondepository service provider fell from 83 miles in 1998 to 37 miles in 2003, with most of the change resulting from greater proximity of customers to nondepository loan providers. being close and convenient is important. data collected as part of the banking agencies'community reinvestment act ( cra ) activities also demonstrate the importance of proximity. as you know, the cra focuses on banks'lending and services provided within their local communities. from cra and other data, we can estimate the share of loans to small businesses made by depository institutions located physically within the local market area. these data show that between 1996 ( the year we began collecting such data ) and 2004, the competition from out - of - market lenders has increased, a result that will not surprise you. however, in value terms, the share of small - business loans made by out - of - market firms did not exceed 18 percent in any year. small - business owners look overwhelmingly to local lenders for credit. we see that, for community banks, the overall picture is complex. in financial terms, community banks remain quite strong, and there is considerable entry into the business. new technologies and management methods have eroded some of the traditional informational benefits of relationship finance, however, and community banks have lost market share to larger banks and to nondepository