But I have suggested to my colleagues that while many companies have begun and will likely continue to raise prices to counter rising costs that derive from a range of factors – including the run-up of commodity prices in 2010 and increases in the costs of production in China – weak demand is beginning to temper the ability of providers of goods and services to significantly raise prices to consumers. My concern is with the transmission mechanism for activating the use of the liquidity we have created, which remains on the sidelines of the economy. I posit that nonmonetary factors, not monetary policy, are retarding the willingness and ability of job creators to put to work the liquidity that we have provided. I have spoken to this many times in public. Those with the capacity to hire American workers – small businesses as well as large, publicly traded or private – are immobilized. Not because they lack entrepreneurial zeal or do not wish to grow; not because they can’t access cheap and available credit. Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy. In an environment where they are already uncertain of potential growth in demand for their goods and services and have yet to see a significant pickup in top-line revenue, there is palpable angst surrounding the cost of doing business. According to my business contacts, the opera buffa of the debt ceiling negotiations compounded this uncertainty, leaving business decisionmakers frozen in their tracks.
The two would appear to be unrelated, but might well be – though not in a manner that would be readily apparent. I will conclude by trying to connect the two dots. Texas’ record of job creation Here is a chart that displays nonagricultural employment growth by Federal Reserve Districts over the past 21½ years, using the employment levels of 1990 as a base of 100 and tracing job creation through June. BIS central bankers’ speeches  1  To illustrate a point, I am going to separate out three districts: the Second, headquartered at the New York Fed and consisting of New York, southwestern Connecticut, Puerto Rico, the U.S. Virgin Islands and a dozen counties in New Jersey; the Eleventh, represented by the Dallas Fed, made up of Texas, the wooded areas of eastern Louisiana and southern New Mexico; and the Twelfth, or the San Francisco Fed’s district, which consists of California, eight other states, the Northern Mariana Islands, American Samoa and Guam. The state of New York produces 72 percent of the economic output of the Second District; Texas accounts for 95 percent of the Eleventh District’s output; and California accounts for 62 percent of the Twelfth District’s output. One might consider this second chart to be an imperfect but reasonable proxy for the employment growth over the past two decades of the three largest states in the country.