Although average hourly earnings rose more quickly in October―pushing the year-over-year pace up to 2.5 percent – this indicator can be volatile on a month-to-month basis, and it has not been borne out by some other important measures of labor compensation. For example, over the past year, the Employment Cost Index for private sector worker compensation has risen 1.9 percent, remaining within the narrow range of recent years. This is important because my assessment of what constitutes maximum sustainable or full employment depends in large part on how a tighter labor market translates into compensation gains. At the same time, one needs to be cautious about interpreting compensation trends in the current environment. It is possible that factors such as very low headline inflation and weak productivity growth are holding down what workers receive in  2  BIS central bankers’ speeches  compensation. Therefore, because of such factors, compensation growth may not provide a reliable signal about whether we are approaching full employment. To sum up on the growth side, the economy looks to be in decent shape and is likely to continue to grow at a slightly above-trend pace. Spare labor resources are shrinking. But there still is some risk that the growth pace could slow as the trade sector acts as a drag on aggregate economic activity. On the inflation side of the ledger, I have greater concerns because we continue to fall substantially short of our inflation objective of 2 percent for the personal consumption expenditures (PCE) deflator.
In short, the following is needed: •  An insolvency regime which ensures that banks can be effectively closed at a low cost to the deposit guarantee system  •  An effective depositor protection with a quick pay-out to depositors and a credible financing  •  The ability to take special measures, such as guarantees, to avoid the failure of a bank threatening the financial system in its entirety  •  A broad tool box to be able to enforce, also in those exceptional cases, the principle that the state will not bear the losses of shareholders and creditors, where it should be possible to tie conditions to any guarantee issued and with the option of temporary nationalisation as a last resort. But drawing up a broad structure is perhaps the easiest part. After that, it is necessary to find a concrete legal framework. In the end, this responsibility falls on our governments. A few countries seem to have much of this in place already. And some have come quite far in this work and devote quite a lot of resources to the project. Those that have not I think are well advised to get started. It is just never a good idea to set up the fire brigade first when the city is on fire. 10  BIS Review 62/2008  But it is a delicate task trying to find an efficient and legally secure system which will also work cross border.