. variety of reasons my state has been impacted by this, any comments of on -- on thethis chatting of jobs in exploration and production component of the energy industry is going to impact our economy?s going to impact our comic? chair yellen: we have seen a huge decline in oil prices for reasons pertaining to huge increases in supply and perhaps some slowing and demand. it has had an enormous impact on capacity and jobs net sector and that has been one of the things that has been holding back growth. >> so even though we've gotten some benefit for consumer spending, going forward, as those jobs are further shed,

your forecast is that the economy is going to continue to not thethis 2.5% rate, 3% we had under reagan and clinton. if we are shedding always jobs such a industry provides tremendous number of jobs for less skilled workers, it seems that that endangers even the 2.5% growth we have. we have been creating roughly 200,000 jobs a month for the entire year. >> i was told it takes about 270,000 jobs a month to bring back into employment those who are currently unemployed to take care of those who would prefer to work because the labor participation market is so low. for those newer workers entering the market to employ them as well as maintain full employment for those currently, i'm struck something i read speaks of those

20 or 25-year-old workers being underemployed. is that adequate to increase job participation and those who are newly entering? to simply provide jobs for those entering the labor force requires 100,000 jobs per month. there is a downward trend in the labor force due to its aging. if labor force participation is stable, that helps to storm people who are discouraged and to have dropped out, but that still requires less than the 200,000 jobs we have had. >> in terms of increasing backup to four employment -- our labor market participation is the lowest it has been since jimmy

carter. labord think our participation rate has been as jimmy it has been since carter. how do we increase our labor participation because we don't seem to be a accomplishing that for 210,000 labor growth. on a path of declining labor force participation due to the aging of the workforce, of the population, so i don't think we should expect to see labor force participation move up a great deal over time. if it were simply stable over time rather than on that welining trend, i think would be observing people who were perhaps discouraged and in a stronger job market would move back with 200,000 jobs a month

is enough to make progress on those dimensions. return now of the two of our key members of the committee. so we have time for both of you to answer questions. thank you. sorry about the vote. in your comments when i was here earlier, you mentioned moderate growth within the economy, yet an economist at citigroup predicted natalie a tightening of the u.s. labor market would force the fed to increase market interest rates more rapidly than anticipated, they said it would result in an inverted yield curve which precedes a recession and actually, they said they would likelihood of a

recession in the united states in 2016. me, but i amh to not an economist and i'm not the fed chair. risk may be too low as well. what would you assign a risk level to a recession next year? i don't have a number for you but a decision on the part of the fomc to increase rates would only occur in the context where the committee to enjoywe are going at least somewhat above trend growth so we would see an improvement in the labor market and of course, there's always uncertainty that pertains to the economic outlook. the risks to faster growth and slower growth, i cannot put a

number on the risk to recession but i would not see it as anything approaching 65%. >> assuming you do something or don't do something with respect to interest rates. still meantes would it's at a historically lower level. what tools would you have -- what tools with the fed have if the economists at city were into and we did go recession. what would you have to mitigate the effects of such a problem? we have all of the tools we have previously used to try to combat or a session.

first of all if we raise rates, we would have the possibility of lowering rates. in setting or determining longer after rates had hit zero, we discussed the reasons we thought it would be appropriate to keep rates at low levels. we discussed why we would be keeping rates at low levels for a long time. the market absorbed the notion that longer-term yields came down. we have at said person -- we have asset purchases in order to stimulate the economy. successfuluices were

those adjustments were successful and those tools are still available. >> i met with a group of ohio bankers and they brought up to me the committee on banking newrvision planning to have rules and are required to hold against their trading book assets. impactd have a negative on significantly increased borrowing costs, so by some estimates, they told me the regulatory changes would increase mortgage and auto loans a percentage half and home loans by as much as 6.3%. i'm a former realtor, so that number popped out to me as a huge problem. concerns that the

basil committee rules would make borrowing money more expensive than hinder growth across the country. do you support finalizing the proposal before these concerns are addressed and will you be conducting your own cost-benefit analysis of the rules these would have in our country? chair yellen: capital ,equirements on those positions i'm not aware there's any thought of changing those requirements in the manner that would have the kind of impact they are discussing, but we will try to get back on that. >> thank you chairman, my time has expired. chair, how are you?

myst, because i promised team, we want to extend a thank for tolerating our technical written questions and some of the responses. it is appreciated because some of them are lengthy in nature. slightlye us a different direction? i'm blessed to sit on financial services, so we get to cross each other's paths quite often. ago, you were discussing some of the indexes and economists who are saying there are storm clouds on the horizon. our team has been collecting information about worldwide debt and does that cause any fragility in north america? i'm seeing numbers in the last nine years that developing country's, 57 trillion in new ,ebt, double their gdp growth

worldwide debt is 300% of gdp. how do you from a policy look at an interest rate adjustment and the effects it will have on u.s. currency and the effect it would have on -- i will call it a crisis, but a debt stress on the horizon. how does that affect your decision making and does it provide any fragility to our economic growth or recession threats? it is certainly something we take account of as we try to evaluate the global environment and the impact it's likely to have on the united states and something we look at as part of our financial ensure the risks that could impact financial

stability in the united states. agree with some of the swap agreements -- we reserve banks that help to wall off the cascade effect? those of us who remember the does therisis -- what fed in gauge in from a policy set? the fed has swap agreements with the central banks where we think it is important to make sure banks doing dollar-based business have access to adequate liquidity. have no swap arrangements with emerging market economies. the reason we engage in those agreements is to assess

financial stability in the united states. did you use the word indemnification? >> and occupation -- there are a few of them. chair yellen: these are risks when we look at financial markets. over at been discussed the last year or so is the fact in manyvate companies emerging markets have taken on dollar denominated debt. my sense is the banking systems and financial sectors of those emerging markets have been much more carefully regulated in recent years and are less vulnerable and have themselves less dollar denominated and short-term debts.

the dollar denominations in these countries -- >> are you seeing risk from developing countries and debt loads in those countries that would affect our economy? it is a risk we monitor. it's a serious risk to the financial system. this is not meant to be a one-off question, but we were looking at data from about a month ago. from the wayaway they are being settled -- some of that i did not know was because of regulatory or cost situation being settled under our environment. does that move to dollar denominated contracts being settled overseas?

does it have any threat or difficulty to the ability to see data and influence regulatory movement of those resources? not awareen: i am there is such a trend but i will try to get back to you. >> that is one of those technical written questions. i will yield back. >> i just want to inform members here that the chair has a need to leave at noon and we want to honor that. and i wantair agrees to give everybody a chance to get a question in, but could we limited to one question and keep it to two or three minutes so everyone has an opportunity to do that before we run out of time? for posting and thank you for being here.

aced on the commentary i have heard from some of my colleagues claiming the federal reserve overreaches and its ability to adjust interest rates, it may not be clear that one of the impactingtant factors how the federal reserve sets its rate is based on the equilibrium real interest rate which has been consistent and may be even below zero. given that the rate is below zero, what has not been receiving enough attention is how fiscal policy should play an increasing role in stimulating demand and providing at tech to the economy. since the federal reserve has limited tools and how they can impact monetary policy, including adjusting interest rates and implementing quantitative easing or forward guidance, can you speak to the impact of that fiscal policy, particularly sequestration and the lack of support and certainty for certain tax

export --es as the import bank has had on our economy question mark -- on our economy? the so-called equilibrium rate is a real rate of inflation, and adjusted rate fell sharply after the financial crisis and remains quite depressed. it is a factor that leads us to believe that even when we start raising rates, those rate increases will be gradual. when those -- when the rate comes down, rates are likely to be lower than the historical norm. are operatingwe in a positive rate environment, if the economy is hit by

negative shots, we have tools we can use. our most assured institute of policy is the fed funds rate. so when the rate is low, we have less room to respond to negative shots. it would be helpful to be in an moreonment and give us scope to be stimulating the economy and responding to adverse shocks if the average level of interest rates were somewhat higher and -- i don't want to give you advice on fiscal policy, but a more stimulative fiscal policy would enable the fed to have somewhat a higher level of rates and more

scope to respond to negative shocks. >> thank you mr. chairman and madam chair. the recent fomc projections have a long run unemployment rate of 4.9%, which is what we were taught was maximum unemployment. but the broader market the bms uses count those who have given up working -- looking for work or employed part-time. still higher than its average 9% in its expansion from 2001-2007. how important is that and other labor tools, given the considerable slack suggested, this could be the right time to raise rates. chair yellen: i would agree with

you that you six remains elevated relative to its historic norms and is higher than i would have expected based on our historical experience, given where the standard you three unemployment rate is and it is one of the things we need that even though we are close to remains an, there margin of slack in the labor market. an important part that makes it that hard is involuntary unemployment and that has come down substantially, but it is hard to tell because there is a trend for more part-time employment, but i believe it remains higher than so-called full employment economy. ande are also discouraged

workers, sottached i do see margins of slack and they are reflected in that usage. >> congressman paulson? .> thank you for being here i appreciate your patience. i want to follow up along the accumulative impact from the regulatory perspective. capitalking of the proposal.d this tl ac can you describe what it means on an accumulative basis either on the industry or the economy -- this cost-benefit analysis, have you done or has it been talked about doing a benefit analysis of what these

regulations have on the industry and the economy? this rulebook has been in a constant state of revision. maybe described that a little bit. can you see any benefit of causing the process? i do think the regulation is having an important impact on the economy. my assessment would be the most important impact it has had is to make the banking system and financial system more broadly far safer and sounder and less crisis prone than it was prior to the financial crisis. regulations, the long-term debt requirement we proposed recently and i believe you also mentioned capital surcharges.

understandtant to those regulations only apply to banks and in our regulations, we are trying to thatsure community banks are not systemic and are not responsible for the financial hitis are not going to be with all of those regulations, but i do think it is critically important that the largest organizations need to be safer and sounder. they need to have more capital in liquidity and they need the event they encounter difficulties or insolvency, we need to resolve those institutions. we do not want the taxpayer bailing out those institutions

again. the surcharges are higher capital standards means they are much less likely to fail. advantage to the extended burden some and competing away their business and if they did need to be resolved, the lost absorbency that comes from the holding company will be something that's that will enable their resolution either under title ii or under the bankruptcy code. i think there are some costs associated with these regulations and on parts of it, we have done significant cost and if it analysis. estimate, thene cause -- the cost to the united states of the financial crisis probably amounted to $16

trillion -- i've seen one estimate that puts it at $16 trillion. having a safer and sounder financial system by having more capital and liquidity and resolve ability is clearly a net benefit. >> thank you. thank you. i hope this question hasn't been asked before. your to publicly stated mandates are priced ability and full employment. question onwer my for employment, i want you to remover we have a lot of safety net programs and a lot of people feel we are not going to achieve wherever we are at right now because the safety nets are so generous, people are not looking for working part-time. but right now priced ability and

full employment are right where you want them to be. given that we are at a time of priced ability, full employment, and the banking system has recovered. could you explain to our savers and elderly population why you continue to maintain a zero interest rate given that it appears we are at full employment, given it appears our banks are stable, and given prices are stable. chair yellen: inflation is running below are 2% objective, and we want to see that change. but the economy is, in the sense you have described, doing well. that is the reason it is a live option for us at our december meeting to discuss as we

indicate whether or not it is appropriate to raise rates. but we do have to ask the question what is the so-called neutral rate at which the economy would continue to operate near full employment and approach priced ability? , and ideal of research discussed some of this in the speech i gave just yesterday suggests the neutral rate of interest is much lower than it has been historically, in real or inflation-adjusted terms, perhaps close to zero. the level of interest rates that would support a continuation of these desirable trends is probably low. when we were recovering from the great recession with high unemployment to stimulate all the job creation we had, we had to keep low interest rates near

zero. we are contemplating raising them, but we expect that process to be gradual. having to make sure achieved this progress that we don't put it in danger. >> you mean my whole lifetime, when older people put money in the bank and they were getting 3% or 5%, we were putting an unnecessary drag on the economy? chair yellen: we had a different economy then and many things are different to mystically and globally than they were then. savers werereturn able to get depends on the strength of the investment demand, the strength of borrowing the funds, trying to provide -- we live in an economy globally as well as to mystically where in some sense,

there is savings relative to those funds and that's a market force that shapes the reality that the federal reserve areates in and conditions able to set rates that would be consistent with congress 'objectives. >> so people are saving more so we cannot give them the interest rate? chair yellen: if there were a huge demand for those funds, interest rates would be it up to the levels we are more accustomed to having experienced historically, but the demand for those funds is simply not strong a level ofenerate interest rates that is more historically normal. >> thank you.

congressman hanna has graciously waved his time. i want to say that i think this an instructive and been timely hearing. we deeply appreciate your willingness to be with us. we have a common goal. the congress in the united states, along with the executive branch and the federal reserve, we have that common goal to implement sound policies that achieve a dynamic economy that provides meaningful employment for our generation and future generations. the more we work together, the more we can share. we can pass that on to future generations. that is clearly a goal that has to be pursued with a lot of passion and intellect. with that, the hearing is adjourned.