It may be difficult to define the substantial improvement the Federal Open Market Committee wants to see in labor markets before it reduces accommodation, according to Federal Reserve Bank of Atlanta President Dennis Lockhart.

But, in a speech in Chattanooga, Tenn., Thursday, Lockhart gave some examples of what he would look for to signal improvement.

First, Lockhartsaid, he wants unemployment rates to be reduced by people finding jobs, not by “discouraged workers dropping out of the labor force,” according to text of his speech, released by the Fed. Also, he said, he wants to see “growing labor force participation,” which would signal added public confidence.

Reductions in underemployment and indications “that improvements in all these indicators are gaining momentum and are sustainable,” are also important. Also, “forward indicators of labor market health, such as falling claims for unemployment insurance,” need to be seen.

Turning to the economy, Lockhart said the 2% average growth of the past 40 months, which he termed as “modest,” should continue, while employment grows gradually. While the housing sector appears to be improving, business investment appears down, with the elections and the pending fiscal cliff problem delaying decisions.

“At the moment, we are in a bubble of uncertainty that is restraining the economy,” he said.

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