John Wiliams of the Sa Francisco Federal Reserve comments:The Federal Reserve has a dual mandate: maximum employment and price stability. We want everyone who wants a job to be able to find one and for inflation to average 2% per year.

Unemployment will never be zero, because in any well-functioning economy, people leave jobs and new people enter the workforce. Economists use the term “natural rate of unemployment” to describe the optimal rate for an economy at full health. It’s hard to know exactly what the number is, but I put the natural rate at about 5%.

We dipped just below that, to 4.9%, in January. I expect the unemployment rate to continue to come down a bit further, reaching the mid-4s later this year. This is a reflection of steady improvement in a labor market that has fully recovered from the recession and its aftermath, when we saw a peak of 10%.

A further sign of the health of the labor market is that more people are quitting their jobs – indicating they feel confident that they’ll find another – and they’re probably right: Job vacancies are at the highest levels since they started collecting the data in 2000. We added more than 2½ million jobs in 2015. All in all, we have reached or are close to maximum employment across a broad range of markers.

The Fed sets a target of 2% average inflation. Many people think that Fed policymakers’ concern lies disproportionately with inflation that’s too high. They think we view inflation lower than 2% as sort of “not great,” but see inflation above 2% as catastrophic. That’s not the case. In my view, inflation somewhat above 2% is just as bad as the same amount below.

Despite recent financial volatility, my overall outlook for the U.S. and the global economy remains unchanged. There is plenty of concern about China’s slower pace, but as I said last year, this largely reflects a pivot from a manufacturing-based economy to one driven by domestic consumption and services – the exact engines that are currently powering U.S. growth (Williams 2015).

Despite the Sturm und Drang of international and market developments, the U.S. economy is, all in all, looking pretty good.