Stronger wage growth would likely result in more customers walking through the doors of business establishments and leading to stronger sales, more hiring and capacity expansion. During a normal and steady-growth business expansion, nominal wages would typically grow at the rate of productivity expansion plus compensation for inflation. If normal productivity growth is 1.5 percent and inflation is at our 2 percent target, this would suggest a steady labor compensation increase of 3–1/2 percent is sustainable without building inflation pressures. At today’s 2 to 2–1/4 percent compensation growth rates and labor’s historically low share of national income, there is substantial room for stronger wage growth without inflation pressures building. Fifth, do we really know that the public’s expectations are for low inflation? Judging by today’s Treasury yield curve, inflation expectations remain below our target. If anyone was expecting inflation to accelerate in the future, surely individual and institutional investors would demand to be compensated for growing inflation risk. However, our Chicago Fed affine term-structure model implies that the three-year-ahead average inflation expectations priced into the Treasury yield curve currently are below 2 percent and remain so for quite a number of years to come. Given today’s unacceptably low inflation environment and the wealth of inflation indicators that point to continued below-target inflation, I think we need continued strongly accommodative monetary policy to get inflation back up to 2 percent within a reasonable time frame.
Both the incidence of student loans and average loan size are by far greater in for-profit institutions than in comparable public colleges. Given the importance of post-secondary education in our nation’s future, and the key role that human capital plays in our nation’s growth, we at the  BIS central bankers’ speeches  3  New York Fed will continue to analyze the growth of the private for-profits in particular, and post-secondary institutions in general, in our region and the nation. I will now ask Jaison Abel to discuss economic conditions in our region. 4  BIS central bankers’ speeches