austerity measures. praises the proposals as credible. pimm: stocks rise in china as the government boosts the economy. it is the biggest 2 day gain since 2008. yellen will answer questions and half an hour. what she will say about raising interest rates. is it in the cards? we will bring that to you, life. -- live. pimm: i am pimm fox. betty: i am betty liu. once again we are looking at how the markets are trading, starting with stock markets. what a run we have had so far.

much at session highs for the s&p and dow. losses erased all of the that we have seen so far this week. that is based on the trauma in the chinese stock market and what is going on in greece. this is a rally on the back of the roof warm proposals by the greek government. oil markets are still seeing steep declines for oil. nymex is down 1/10 of 1%. we have had oil continuing to in oile most since march prices. that is on the back of concerns about demand from china. pimm: and on the strength of the u.s. dollar. bit onre selling off a the yield is the tenure goes higher, 2.38 percent. the yield on the 30 is 3.18%. we can see the treasury on the

tenure looking back over two months. looking at currencies, the 30 year, bouncing back with a bit of a selloff. the currencies, the dollar weakens against the euro, 111.50 four. the yen strengthens against the dollar. the pound sterling is also gaining against the dollar, 155 .03. bloomberg the terminal, greek prime minister alexis tsipras has a new challenge. he has to sell his plan to his fellow countrymen. the performance was judged as inadequate by lithuania and praised by france. the parliament is debating the package of spending cuts today. ' jack lew isates cautiously optimistic. >> it would be at everyone's interest to resolve this. reason for hope. i cannot sit here with buoyant

optimism and say it will be worked out. it will be a long view days. it should get worked out. pimm: the final word will come from euro zone leaders, who will hold a summit meeting on sun day. -- on sunday. i want to bring in hans nichols. what is going on? hans nichols: they're debating. we do not know if they will have the votes to give alexis tsipras the authority to come to brussels to start thinking she nations. we are testing if the last best offer from the creditors to the greeks is still on the table. that is the offer that was rejected. -- alexis tsipras is saying that they will accept that offer. creditors are saying that offer is no longer on the table, and we are hearing that there might have to be more drastic changes in reform to the greek economy.

2 examples, they are not definitive, but 2 examples that we have heard from the slovakian -- slovakian finance minister says there needs to be more reforms. this is in the last two weeks the greek economy has been freefalling. all of the previous targets were based on economic data before the free fall they may need to readjust, now. that is why we need to see what happens on saturday. pimm: later, we will hear from janet yellen. she will discuss the u.s. economy in a speech she will give in cleveland. we will have that coverage, live, at 12:30 p.m. betty: history was made in south carolina this morning.

[cheering] betty: those cheers tell the story of the confederate flag being removed from the south carolina state capital. the state legislature voted to take the rebel flag down after 9 lakh church members were massacred last month. the flag will now go into a museum. the talks about the iranian nuclear program is going into overtime. another deadline was missed today. it was the last chance to come up with an agreement that would qualify for a 30 day review in congress. the negotiation years are arguing about a number of issues, including the arms of our go on iran. john kerry is having an extended stay in vienna. he has been locked in a current round of iranian talks longer

than any u.s. official has in fourd to talks decades. he is therefore his 15th day. that is the longest extended stay since 1983. chinese equity fund's sigh record influx of investment, thatte the bear market nearly wiped out four trillion dollars of the asian nations stock market value. merrill lynch says that $14 million flowed in in a week. behindnot sure what was the move, but noted that most of the money poured into the share for local chinese investors. pope francis needed a place to change clothes before celebrating mass in santa cruz, bolivia.

he ended up at a burger king. the restaurant was closed to customers at the time, so the pope. it would be a suitable location. the fast food chain posted the news on its facebook age and thankedhe pontiff -- the pontiff are making the burger king restaurant his robing room. at least he found a place. those are your top stories. betty: coming up, we have a lot. we will get inside stocks of the economy in china. we will talk to a pulitzer prize-winning author for her coverage of china who is now at midmarket securities. to thee'll bring you resort for the rocky mount economic summit. you will hear from the former federal reserve president.

betty: janet yellen will speak about the economy and less than half an hour, at 12:30 p.m. eastern. we will bring you her remarks live and in its entirety when she begins. pimm: all eyes are on greece. appears the greek government is prepared to accept economic reforms that it rejected last week. francois hollande said that the greek proposal was serious, and showed determination to stay in the eurozone. for primeout-face minister alexis tsipras? i want to bring in joe has just returned from athens. are you surprised by what appears to be an about-face? oe: he offered a deal that he could've gotten several weeks ago. is that theblem now

referendum has caused economic collapse, so that the goals that they said -- they will now have to do more. it seemed like he had the nod at his back after the referendum. is strange, because, yes, there are a lot of people who think that greece needs to the amount of debt reduced. the issue is the current crisis. their current payments are not that high, and the debt has extended pretty far. they made a huge deal about this one thing. we don't know if they will get that. in the meantime, the economy has theypsed further, and didn't get any improvement in terms of the austerity measures. pimm: is there any possibility

that what alexis tsipras and the government, what they have been doing is a calculated game to get a deal, not only in the short term, but debt reduction and additional dollars. they be they know this, and now have the populace behind them. joe: i've heard people try to spin this as a secret plan. i'm not seeing it. it looks like the shutdown of the banking system will cause serious damage. it is not easy to reopen banks a cousin of the residual nervousness. the best argument -- reopen the residual of nervousness. the best argument is this is what they needed to do to get the votes to pass in our limit. it is hard to see anything tangible that they have gotten from several months of fighting. that in greece, there will be a vote late tonight. tonight, then,

depending on how it goes, could we see capital controls be lifted as early as monday? they say that if they get it deal the capital controls could be lifted soon. it is hard to know if they could be fully lifted. you have to consider that there has been a lot of nervousness. if you had money in a greek bank account, would you leave it there? pimm: the money hasn't disappeared. it is still in euros? joe: that is a better outcome than other theoretical things that have been talked about. it is not easy to just turn off the switches when you turn them on. we got close to the break, right? it is amazing how extremely went. thank you.

joe weisenthal will be monitoring the developments as they happen in europe. we got a crash course this week and how china handles sudden drops in its stock market. china learned it was hard to control investors and to the rest of the people in their economy. we will be right back. ♪

pimm: a shot of lower manhattan. right down to the statue liberty and the empire state building.

i am pimm fox. betty: it is nice. i am betty liu. let's get back to the markets. julie hyman has been digging into the rally? julie: where extending the games. the nasdaq is having its best day since late january. the s&p is up since may 8. the dow is having its best day and a month. although the averages are doing well over optimism over greece. individual movers are helping. tourism is doing well. royal caribbean is one example. they report earnings in a couple of weeks. suntrust analysts thinks they will be raising their forecasts soon. the folks at suntrust conducted company's business and said that royal caribbean's pricing growth has accelerated since it last provided guidance in april.

point are up .7% -- four 7%, and is the best performer. we are watching american airlines, up 3.5 percent after cutting its forecast for domestic seating capacity. capacity to much, you might not have as much pricing power. the company says capacity will grow 1-2%. worth 2% to 3%. we are also seeing other airlines rising. is also up.a alaska said its passenger revenue per available seat mile is going to decline in line with the industry. i was talking to a bloomberg intelligentsia analyst who said the costs are improving at the company and the they locked in a good price for gasoline at $2.12

. if you're looking at what happened with the airlines, this is the bloomberg airline index. it dropped 24% from january 26 to the low on july 1. it has bumped up, but it is in a bear market in terms of how the airlines have performed. we are getting a little balance, may be the capacity is improving. thatil is also down, and does not hurt when you look at how the airlines are trading. betty: we have seen a huge decline in oil. thank you. pimm: three stores have dominated -- three stories have dominated coverage. struggle,debt the shutdown at the new york stock exchange on wednesday, and historic moves like china to stem a fall in stock prices. it forced entities the ishares to prop up prices and trapped

investors by prohibiting sales by executives and stopped trading on the shanghai index. betty: what have we learned about china this week? governance,ystem of economics, and politics? this is a pulitzer prize winning journalist. it is good to see you. we have seen these moves by the chinese characterized in many ways. mark mobius called them desperate. how do you describe them? >> it is entirely rational. tamed the markets for two days, which is of the three. while it is a victory, it is a is ack for warm -- it setback for reform. saying that we would let the

markets play a more decisive role in the economy. except when the markets change. the point. they're more comfortable when they command and control the economy. communist party, their legitimacy derives from economic performance. with 8.8 percent of all of the chinese population investing in stocks, and that is a huge number when you think of 1.3 billion people, of course they do not want unhappy investors protesting, that they realize that this gets at their legitimacy. they're not raising the standards of living or performing economically. for them, this is a government and party with deep pockets, what is a delay in reform when it raises their legitimacy? leap i think of the great forward, but you have said that

it is more about a lurch in one direction or another. stability.res about we have seen a nice time span of stability since the economic crisis. china is very unprotect a bowl. it has the capacity to be incredibly unpredictable. we see is unpredictable huge lurches, because it does not have a real zillionth -- a resilient economy to absorb the shocks. expert waser china saying that the government has a esod control over the urbanit in china. they're doing well and earning money. the rural people are not invested in the stock market. currentmillion or so my workers who go back-and-forth

between the countryside to the city, are they investing in the stock market? is that why the government is worried about that populace? that populace.ly the surveys that they have taken show that probably the majority, 75 percent to 80%, are people with only a middle school education. that includes a large swath of the middle class. populationbout that in china. it is 8.8% of the entire population. attack on their legitimacy, and that is why they care. ory do not want protests attacks of the legitimacy as the ruling party. pimm: what about the legitimacy on the president of china? >> when you attack the legitimacy of the party your

-- you are taking the legitimacy of the leader. we don't know where president ing wants to take china. he has clamped down on every aspect of social controls. whether it is the internet, business, or the tibetan regions that we know about. it is media, entertainment, and internet controls. he does want reforms, but then he also doesn't. what his vision of china is. he does want a huge china, so he is making huge moves in the south china sea, but is he going to become a putin? pimm: we hope not. thank you for joining us. on "theill ahead bloomberg market day," monetary

policy at home or about -- at home and abroad. betty: we will hear from the chairman of ubs.

betty: this is the bloomberg market day. crossing theies bloomberg terminal. the u.s. is preparing cases against former deutsche bank employees for manipulation. could come before the end of the year. the department of justice is investigating five former traders for rigging the u.s. dollar version of the benchmark. it would be the first against traders for the german lender in connection with the rates. ta is passing on a request for a fund for victims of

defective airbags. they want a fund like that created by g.m.. injuries have been linked to the faulty airbags. today, the world lost another hollywood legend. home roles that omar sharif could not played. whether it was a tribal leader, or the lovesick dr. shivago. wonegyptian born actor an oscar for lawrence of arabia. his career spanned more than half a century. on the bloomberg market day, including janet yellen.

this is a great place to work. not because they have yoga meetings and a juice bar. because they're getting comcast business internet. comcast business offers convenient installation appointments that work around your schedule. and it takes- done. - about an hour. get reliable internet that's up to five times faster than dsl from the phone company. call 800-501-6000 to switch today.

perks are nice. but the best thing you can give your business is comcast business. comcast business. built for business. ♪ betty: welcome back to the bloomberg market day. i am betty liu, here with pimm fox. pimm: moments from now we will be hearing from janet yellen.

we will bring you her speech live. betty: as she takes the stage in ohio, other central bankers and business leaders from around the globe have gathered in idaho for the annual rocky mountains summit. that is where we find mike mckee. i know you have spoken with a number of central bankers on our air as well. what are they saying ahead of yellen's speech? mike: we are going to hear from janet yellen but are we going to hear janet yellen? hearing, why did the markets key pricing at a doferent interest rate, why we have a tape or tantrum, and why are people worried about what might happen when the government raises rates? hardmmunication is very and i think it is particularly very hard when you are trying to

make commitments in the future but you really want to be a discretionary polisario maker -- policymaker who can do things in real time. i think our communications efforts, i would require -- i would call them mixed success or mixed failure. as we go back in history and get further away from this. , i think that is what we will conclude. i would prefer the fed did less forward guidance in talking about with their policy strategies are and how they are going to react to data, rather than making pre-commitments to things they are not prepared to commit to. out: we are about to find whether she is taking his advice. betty: we already know what she is going to say because we have some of the prepared remarks. i want to bring in lisa .bramowicz and carl

the big headline is that janet yellen says unexpected events could delay or speed up liftoff of interest rates. that is a big red sticky. >> she is giving a binary answer here. i do not think too many scenarios where things will speed up. is, if she ision in the one or two hike camp, i suspect she is in the one hike camp for this year. seem to her colleagues be in the two hike camp so she has been waiting to see what will happen. she will not reveal her hand too much. not that convincing table pounding that we need to go and we need to go soon. i would say still consistent. betty: stocks are still going

down. they are going down right now. we have some other breaking news. julie hyman has more. julie: the director of the office of personnel management is resigning her post after the massive data breach that affected 21.2 million people. hackers stole social security numbers and other personal data for those people. resigningarchuleta her post after that hack. lawmakers have been calling for her reservation -- resignation in the wake of this. yesterday the opm came out with this updated number as of how many people were affected i this massive breach of personal data. she is resigning in the wake of that breach. we will be bringing more information on the habit on this developing's tory and on that hack. betty: how bungled was that? initially they said eight alien,

then they said 21 million -- 8 million, then they said 21 million. we will stay on that. , given janet yellen carl aptlyks, but as puts it i think we are looking at one rate hike this year. lisa: certainly if she was not planning to hike rates she probably would have indicated on some level that there can turned warmer concerned about what is going on in greece, puerto rico. the fact that she said the fed is on track to hike this year is telling. you are seeing very muted reaction in the bond market. it does seem to be consistent with what they said before. if the fed hikes in september it will be a little disruptive to the markets because they are

pricing in a much lower chance of that lifting off in september. if she wanted to temper that, she probably could come out and say. pimm: she is also mentioning oil prices and the stronger u.s. dollar. carl: she highlights two sheies, given oil prices expects inflation to start turning higher in early 2016, so this hints at emerging confidence. she also says that the impacts of oil and the dollar will be transitory. that could be the monkeywrench in this analysis from the fed. if we see a broader impact on the u.s. economy. subtractions big in q4 of last year and q1 of this year. betty: hang on one second. ms. yellen: thank you for your leadership of the federal reserve bank of cleveland and your contributions to

policymaking at the fomc. thanks to members of the city club for your interest in the federal reserve. i also want to thank senator brown. i know that you approached each day with the goal of improving the lives of american workers and their families. thank you for bringing that perspective to the economic policy debate in washington. applause] ms. yellen: i am aware of the city club's history and promotion of free ideas, and i will do my best for plenty of times -- time for your questions which is an important part of that tradition. communicating with the public is an important part of my job. a few weeks ago, i held a news conference after the latest meeting of the federal open

market committee. next week i will deliver the federal reserve's semi annual report on monetary policy, and answer questions from members of congress at public hearings of the house and senate. on those occasions, aunt in appearances such as this one today, the aim is to account for andfomc's policy actions explain how they are intended to achieve this specific goals congress has assigned us. we do so because it is important that the federal reserve remains accountable within the framework of our democracy. we also do so because we can more effectively achieve our mandated goals, maximum employment, and price stability, as welcome as help maintain stability in the financial system if people understand what

we are doing and why. usally, it is important for to hear perspectives and experiences from a wide range of participants in the economy. this club stands for free and open communication, and so does the federal reserve. years sincearks six the end of the great recession. our nation's most severe economic downturn is the 1930's. u.s. economic output is measured by gross domestic product fell more than 4% from the end of 2007 to the middle of 2009. one of the hardest hit industries was manufacturing. which, as you well know, is important to ohio. the unemployment rate at 10%

nationally and it reached 11% here in ohio. shranknfarm payrolls eight and a half million jobs during 2008 and 2009, were about 6% -- were about 6% of the national workforce. same.hat , ohio lost more than 400,000 jobs were seven and a half percent of the state's employment. in response to the financial crisis, the severe recession, and the risk that inflation would fall persistently far below levels consistent with price stability, we at the federal reserve took forceful action. the fomc aggressively cut our short-term interest rate target. the federal funds rate, from above 5% to near zero by the end lower borrowing

costs and help spur household spending and business investment. with short-term interest rates near zero, the fomc provided further support to the economy through our large-scale asset , buying large amounts of treasury and mortgage-backed, mortgage related securities in the open market. these purchases pushed down longer-term borrowing rates for millions of american families and businesses. recovery, weonomic put additional downward pressure on longer-term borrowing costs by explaining publicly that we intended to keep short-term interest rates low for a long time. rates,term borrowing such as those for mortgages and automobile loans, or lower if

people expect short-term rates in the future to remain low or to rise only gradually. suggests thatnce our policy actions were the pace of economic recovery has been slow. growth and real gdp has averaged only about two and a quarter percent per year since 2009. about a percentage point less than the average rate seeing over the 25 years preceding the great recession. output hasonomic increased at about the same pace as in the nation as a whole in recent years. in the labor market, the u.s. unemployment rate stood at 5.3% high as around half as its peak after the recession, and close to many economists'

assessment of its longer run natural rate at levels it can be sustained without risking inflation. the u.s. economy has created 12 million jobs in the labor market's low point, and total nonfarm payrolls or three and a half million greater than just prior to the recession. ohio's unemployment rate has declined even more during the recovery than the nation as a whole. may, it was somewhat below the u.s. average in that month. nevertheless, although nonfarm payrolls in ohio have increased by around 400,000 jobs, since the low point of the state's employment, payrolls have yet to surpass their level just prior to that recession. manufacturing is important to ohio, and people here are keenly

aware of the challenges that american manufacturing has faced for many years. output asacturing measured in the federal reserve's index of industrial production plunged about 20% during the recession. that is substantially more than the overall percentage decline in economic output. partly as a result, u.s. manufacturing employment fell two and a quarter million during 2008 and 2009. a significantly larger percentage decline occurred in , and whileloyment manufacturing employment nationwide has increased, about 850,000 since the end of 2009 as production has recovered, there is still almost wondered half million fewer manufacturing jobs that just before the reception

-- recession. unfortunately, the number of u.s. manufacturing jobs has generally been decreasing since its peak in the late 1970's. a similar trend has also been seen in ohio where manufacturing jobs have shrunk from about 25% of the state's private sector employment in 1990, to about 15% now. so some of the decline in manufacturing jobs since the longeron reflects the term structural downtrend of employment in this sector. labeling a part of the losses in manufacturing jobs as structural rather than related to the recession in no way diminishes how wrenching those losses have been. this painful trend reflects a number of long-term challenges faced by domestic manufacturers, including the relative cost of

labor and investment in producing domestically versus a broad. workers on average more productive than their counterparts abroad, and domestic manufacturers report that they are looking for more workers with these greater skills as they increase their use of automation and redesign their production processes. as i noted, the national unemployment rate has declined markedly during the economic judgment but it is my that the lower level of the unemployment rate today probably does not fully capture the extent of slack remaining in the labor market. in other words, how far away we are from a full employment economy. slack,ssing labor market we try to distinguish between the effect of cyclical

fluctuations in the economy and the influences of longer-term structural changes, such as the aging of the workforce and other demographic trends. cyclical and structural factors both have affected a number of measures of labor market outcomes that bear on our assessment of slack, including labor force participation, that is, how many people are working or actively looking for work. the number of people working part-time who would rather work the pace of hiring, and the rate at which people are quitting jobs. let's first consider the labor force participation rate. it continued to decline substantially after the the pace ended, with of those declines slowing only over the past year or so, even

as the unemployment rate has continued to fall. age people who are not in the labor force have chosen that status voluntarily. retirees,ould include teenagers and young adults in schools, and people staying home to care for children and other family members. market,the stronger job it is likely that many of these individuals would prefer not to work, and indeed a noticeable portion of the decline in labor force participation rate seen over the past decade or so clearly relates to the aging of baby boomers and their ongoing retirements. however, the pace of decline in the pursuit test in the precipitation rate -- theirrated as some lost jobs, became discouraged, and stopped looking for work.

it appears that despite a drop in a person -- participation the pace of, this decline has slowed since early last year. i think a significant number of individuals still are not seeking work because they perceived lack of good job that anities and stronger economy would draw them back into the labor force. another factor we consider when assessing labor market slack is the elevated number of workers who were employed in part-time jobs but would prefer to have full-time work. in other words, those classified as part-time for economic reasons. at around four and a half percent of employment, the share of such workers is notably larger than has been historically typical in a growing economy. some portion of the greater share of workers who were

part-time for economic reasons may reflect structural rather than cyclical factors. for example, the ongoing shift in employment away for manufacturing and toward services, a sector which historically relied more heavily on part-time workers, that may be boosting the share of part-time jobs. despite these structural trends which make it difficult to know where the share of those employed part-time for economic reasons may settle in the longer run, i continue to think that it probably remains higher than it would be in a full employment economy. other indicators also generally corroborate the view that while the labor market is improved, it still has not fully recovered. for example, the rate at which employees quit their jobs for

other opportunities has tended to go up in a strong economy. since more workers voluntarily leave their jobs when they have greater confidence about their ability to find new ones, and when firms are competing more actively for new hires. upeed, the rate has picked as the labor market has increased but it still is not as high as it was throughout much of the early 2000's. another important indicator is the number of available positions or job openings that employers currently have posted. job openings have increased significantly over the past year and a half, and in another encouraging sign, the pace of hiring has also stepped up in the past year or so so it too continues to run somewhat below the levels that prevailed during the middle part of last decade.

finally, the pace of wage increases may help shed some light on the degree of labor market slack, since wage movements historically have tended to respond to the degree of tightness in the labor market. here too, however, the signal is not entirely clear, as other intors such as longer trends productivity growth also generally influence the growth of compensation. key measures of hourly labor compensation rose at an annual rate of only around 2% through most of the recovery. more recently, however, some intative hits at a pickup the pace of wage gains may suggest that full employment is coming closer into view. the labor market has moved

closer to the fomc's goal of maximum employment, less process has been made in moving longeron to the fomc's term objective of 2%. overall, consumer price inflation has been close to zero over the past year, in large part because the big drop in crude oil prices since last summer has pushed down prices for gasoline and other consumer energy products. price inflation, excluding the volatile category of energy and so-called core inflation, is often a better indicator of future overall inflation. but it too is running below our 2% objective and has been over most of the recovery. the recent low level of core

inflation, 1.2% over the past 12 thehs, partly reflects appreciation of the foreign exchange value of the u.s. dollar during the second half of last year as global financial markets seemed to judge that our economy was relatively stronger than those of many of our trading partners. has pushedr dollar down the prices of imported goods, and that in turn has put downward pressure on core inflation. in addition, the plunge in oil prices may have had some indirect effects in holding down the prices of non-energy items in core inflation as producers passed on to their customers some of the cost savings from lower energy prices. in all, however, these downward pressures seem to be updating and the effects of these transitory factors are expected

to fall out of measures of inflation by early next year. inflation may not sound like a real problem to many people. however, persistently low inflation which can tend to slow the pace of wage increases over time, can weaken the economy by, for example, making it more difficult for households and firms to pay off their debt. the persistent, very low inflation environment also tends to result in chronically low short-term interest rates. this type of situation would leave less scope for the fomc to respond with its conventional monetary policy tool, namely a cut in the federal funds rate to counteract a weakening in the economy. to where i think

the economy is headed over the next several years. the latest estimate shows that both real gdp and industrial production actually edged down in the first quarter of this year. some of this weakness appears to be the result of factors that i expect will be only transitory, such as the unusually harsh winter weather in some lesions of the country and the west coast port labor dispute that briefly restrained international trade and caused disruptions and manufacturing supply chains. also, the typical noise or measurement issues may have played some role. this is not the first time in recent years that real gdp has been reported to decline or grow unusually slowly in the first quarter of the year. there's a healthy debate among within the many

federal reserve system, about some of the technical factors that may lie behind this pattern. nevertheless, at least a couple of other more persistent factors ghed on economic output in the first quarter. in particular, the higher foreign exchange value of the dollar that i mentioned, as well as weak growth in some foreign economies has restrained the demand for u.s. exports. moreover, lower crude oil prices have significantly depressed business investments in the domestic energy sector. indeed, industrial production continued to decline somewhat in april and may. we expect the drag on domestic economic activity from these sectors to ease over the course of this year as the value of the dollar and crude oil prices stabilize.

i anticipate moderate economic growth on balance for this year as a whole. as always, the economic outlook is uncertain. notably, although the economic recovery in the euro area appears to have gained a firmer footing, the situation in greece remains unresolved. looking further ahead, i think that many of the fundamental factors underlying u.s. economic , and shouldsolid lead to some pickup in the pace of economic growth in the coming years. particular, i anticipate that employment will continue to expand and the unemployment rate will decline further. in improving job market should in turn help support a faster pace of household spending growth. additional jobs and potentially faster wage growth bolster

household incomes and lower energy prices mean consumers have more money to spend on other goods and services. in addition, growing employment and wages should make consumers more comfortable in spending a greater portion of their incomes than they have been in the aftermath of the great recession. moreover, increases in house values and stock market prices, along with reductions in debt in recent years, have pushed up households' net worth, which also should support more spending. faced byinterest rates borrowers remain low, reflecting comitatus --ghly highly accommodative monetary policies. recent data about retail sailors -- retail sales, and mike motor vehicles in the beginning of the

second quarter could be an indication that consumer spending is picking up. another positive factor for the outlook is that the drag on economic growth in recent years from changes in federal fiscal policies appears to have waned. temporary fiscal stimulus measures supported economic output during the recession and early in the recovery, but those stimulus measures have since expired and additional policy actions were taken to reduce the federal budget deficit. by 2011, these changes in fiscal policies were holding back economic growth. however, the effects of those fiscal policy actions now seem to be mostly behind us. there are a couple of factors that i expect could restrain economic growth. first, business owners and managers are men cautious and if

not substantially increased, their capital expenditures, despite the solid fundamentals and brighter prospects for consumer spending. larges is her holding a amounts of cash on their balance sheets, which may suggest that greater risk aversion is playing a role. suggestnomic analysis that uncertainty about the strength of the recovery and about government economic policies could be contributing to the restraint in business investment. a second factor that could restrain economic growth regards housing. while national home prices have been rising for a few years and home sales have improved recently, residential construction has remained quite soft. many households still find it difficult to obtain mortgage credit, but more generally the week job market and