In her remarks, Yellen repeated the FOMC statement that "underutilization of labor resources still remains significant." Much of her 16-page speech walked through measures of labor-market "slack" that Yellen uses -- such as the number of people employed part-time who prefer full-time work -- and how much of that slack might be related to weak demand as opposed to longer-term trends...

Because measuring slack is an inexact science, the debate on the committee is likely to intensify if labor markets continue to improve... Other gauges Yellen watches continue to show weakness. The labor force participation rate, at 62.9 percent last month, is near the lowest since 1978. Average hourly earnings are 2 percent higher than a year ago, barely outpacing the 1.6 percent annual gain in the Fed's main inflation gauge.

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