While overall labor market indicators for the second half of 2013 were not particularly strong, the overall trend in unemployment showed some improvement with the unemployment rate falling sharply over that period, from 7.5 percent in June to 6.7 percent in December. However, as has been the case since October of 2009 when the unemployment rate peaked at 10 percent, this decline in the unemployment rate was driven in large part by a decline in the labor force participation rate. Much has been written about the forces that are causing this decline of the labor force participation rate. Researchers have shown that the aging of the population is playing a role, as are changes in behavior. But our own analysis suggests that the cyclical weakness of demand for labor is an important contributing factor. As a result, I conclude that the decline of the unemployment rate significantly overstates the degree of improvement in the labor market. 4  BIS central bankers’ speeches  Looking forward, I believe that the underlying fundamentals of the U.S. economy have improved to the point where we can expect sustained growth above the roughly 2 1/4 percent annual pace that prevailed from mid-2009 through mid-2013. Also, the amount of fiscal drag continues to diminish. Another good piece of news is that Congress has raised the debt ceiling until March 2015. This lessens the risk that political brinkmanship in Washington could harm consumer and business confidence.
Ultimately, regulations exist to promote a safe, efficient and sound financial system that is competitive and where consumers’ interest are protected. Regulatory regimes promote the foundation of trust and confidence that is crucial in any financial system. If people do not trust the system, financial intermediation cannot take place in any shape or form. As the modalities for financial intermediation and payments are transformed by technology, regulation should play an 6/7  BIS central bankers' speeches  active role in creating a similar environment of trust to ensure overall financial stability. The boundaries of regulation will evolve to provide the freedom for participants in the Malaysian financial system to innovate and adopt technology to exploit efficiencies and create new and better solutions. Solutions that not only deliver better experience for consumers, but that better align the responsibilities that we all carry as responsible citizens, to lift people out of poverty, provide our fellow Malaysians a decent living standard, eliminate discrimination and protect our environment. Regulation is never intended to make market players ‘boring'. If they feel that way, it only tells us one thing – that they have become too complacent in their comfort zone and should undertake a reality check. Malaysia’s financial institutions especially must not lay idle as innovations will be relentless in accessing and penetrating the traditional market long enjoyed by the banks. Using the disguise of being tied by regulations is not a valid excuse.