Musalem: Labor market is around full employment; There are some downside risks to the labor market

Good afternoon, everyone! I am delighted to welcome you to the Federal Reserve Bank of Philadelphia’s 13th biennial conference on household finance and consumer payments. This year holds special significance because we are celebrating 25 years of the Consumer Finance Institute’s leadership in consumer credit and payments research. I’m going to brag a little bit about the Consumer Finance Institute and talk about why its work is so important. But, before I do that, I need to remind you all that these are my own views and not necessarily those of any of my Federal Open Market Committee (FOMC) colleagues or anyone else in the Federal Reserve System. Twenty-five years ago, when what became the Consumer Finance Institute was first established, the norm was to physically go to a bank branch to talk to a teller or to use an ATM. Virtually everyone paid monthly bills using checks and talked to a loan officer if they needed a mortgage. The idea of getting investment advice from social media or using a smartphone to pay for morning coffee was only a glimmer in the eye of the most ardent futurists. At that time, the Philadelphia Fed’s region — Delaware, the eastern two-thirds of Pennsylvania, along with Southern New Jersey — was home to one of the largest PIN debit networks in the country. And Philadelphia Fed staff processed millions of checks from families paying monthly credit card bills. This made the Philly Fed a natural place to launch a center dedicated to advancing research on consumer credit and payments — areas of critical importance to so many facets of the Fed’s work. Over time, the consumer credit and payments landscape has changed a great deal, with technological advances driving new forms of payment and reshaping entire industries. The Consumer Finance Institute has evolved to remain at the forefront of these changes, work that has required more data-intensive strategies, new skills, and increasingly greater computing resources. In that evolution, the breadth of the Consumer Finance Institute expanded from a focus on credit, debit, and prepaid cards to encompass virtually all forms of consumer credit and most forms of payments — old and new. What has stayed the same, however, is the Institute’s goal of better understanding how people earn, save, and invest and what drives their decisions. Understanding this behavior is vital to understanding the economy as a whole. It’s easy to see why. Consumer spending represents two-thirds of all economic activity. And the decisions individuals and families make about how much to spend, how much to borrow, and how much to save reflect many things — including the resources that they have today, how optimistic they are about the future, and potential frictions in consumer credit markets. Understanding consumer behavior helps me to better understand the broader FED'S PAULSON DOES NOT COMMENT ON MONETARY POLICY, ECONOMIC OUTLOOK AT CONSUMER FINANCE CONFERENCE