FT: What kind of number represents a satisfactory reading for you on non-farm payrolls to feel that slack is continuing to diminish at a reasonable pace?

Rosengren: That is really tied to what you think the participation rate is going to be doing. It is probably under 100,000 jobs if you are assuming participation, if you are not pulling people into the labour force and just looking at the demographics, it is probably under 100,000 a month. If you are including pulling people into the labour force that is probably 125,000. Anything above that should be enough to have a gradual diminishing of the labour market slack. That being said, if we were getting reports of 126,000 that would not be giving me a lot of satisfaction. There is not a lot of precision in these numbers. I do think that the numbers if you average through what we have been seeing are substantially better than that. It shows that both the U6 and U3 measures have come down relatively rapidly.

“We are getting much closer to the finish line from the point of view of whatever you would consider full employment,” Lockhart told reporters Monday after a speech in Orlando, Florida. “I would expect to continue to make progress. So the beginning of normalization of interest rates I think is quite justifiable in the context of continuing progress of multiple measures of employment.”

In mid-2013, the FOMC announced its intention to taper its ongoing asset purchase program. We can see that this announcement represented a dramatic change in policy from the sharp upward movements in long-term bond yields that it engendered. Personally, I interpret this policy change back in 2013 as the onset of what the Committee currently intends to be a long, gradual tightening cycle. As I noted earlier, we would typically expect that such a change in monetary policy should affect the economy with a lag of about 18 to 24 months. Viewed through this lens, the slow rate of labor market improvement in 2015 is not all that surprising.

This brings me to the question of how to gauge what a healthy, full-employment labor market looks like. The most common metric is the “natural rate” of unemployment—the optimal rate we can expect in a fully functioning economy. Before the recession, it was generally thought to be around 5 percent... My assessment is that there has not been any lasting, significant shift in either direction. My estimate of the natural rate of unemployment today is 5 percent, consistent with pre-recession estimates. With the current rate at 5.1 percent, we are very close.

"I see us getting to full employment basically by the end of this year or before then, and in fact having a pretty strong labor market," Williams said, explaining that he assesses normal levels of employment to be about 5.2 percent.

[I]n our studies of the Bakken at the Minneapolis Fed, we have been struck by what might be called the localness of the Bakkens impact.

This localness phenomenon is depicted in terms of wages on this chart. It shows that wages have skyrocketed since 2004 within the Bakken counties. Wages have grown less strongly, but still robustly, in counties that are within 100 miles of the Bakken counties. Once we get outside that 100-mile circle, though, wage growth within a county is essentially unaffected by its distance from the Bakken.

I would like to highlight some work by Richmond Fed economists Andreas Hornstein and Marianna Kudlyak and Professor Fabian Lange of McGill University. In a recent paper they authored with Tim Sablik of the Richmond Fed, they have developed a new and intuitively appealing approach to estimating the extent of labor underutilization

They construct what they call a Non-Employment Index by taking each category of persons who are not working and weighting them by their propensities to become employed. This provides a unified framework for viewing the non-employed population that addresses many of the objections that have been raised to the conventional unemployment rate. They also take an improved approach to incorporating part-time workers by taking into account that the underutilization of a person working 20 hours per week is less than the underutilization of a person working zero hours.

Movements in their Non-Employment Index over time closely track movements in the conventional unemployment rate In particular, the Non-Employment Index is about where it should be based on past episodes when the standard unemployment rate was about 5.9 percent.

This research supports the conclusion that the standard unemployment rate by itself is still a reliable indicator of the degree of labor underutilization. There is more underutilization than captured by the unemployment rate, but there always is, and there seems to be no more now than is typical when the unemployment rate is where it is now.