US Federal Reserve chief Janet Yellen has argued that the US labour market remains slack, adding that Fed policy needs to stay focused on generating jobs.

Ms Yellen said that the steady fall in the official unemployment rate to 6.7% masks deep weaknesses in the jobs market.

In a speech in Chicago, she pointed in particular to the high level of people unemployed for a long term, despite the rebound from the Great Recession.

"While there has been steady progress, there is also no doubt that the economy and the job market are not back to normal health," she said.

Ms Yellen emphasised that even though the Fed has begun ratcheting down its huge bond purchase program, the slack in the labour market shows the economy still needs its support in the way of ultra-low interest rates and Fed programs for low-income communities.

"The numbers of people who have been trying to find work for more than six months or more than a year are much higher today than they ever were since records began decades ago."

Overall, she said, the economy remains "still considerably short" of the Fed's goals of maximum sustainable employment and stable inflation.

While inflation remains extraordinarily low and not a problem, she said the jobs market is a challenge, and that the Fed's aim is to bring the unemployment rate down to 5.2-5.6%.

Addressing a current debate among economists and policy-makers, Ms Yellen said some of the problem in fighting unemployment is "structural"; that many of the unemployed do not have the right skills for today's economy.

But if that were the main problem, she argued, there would likely be more of an inflation problem and the Fed's policy to encourage job creation via ultra-low interest rates would not have been as successful as it has been, pulling the rate down from 10%.

Moreover, she said, the evidence of a high level of people in part-time jobs, a very low level of turnover in those employed, a low labour market participation rate and extremely low wage growth, all point to significant cyclical slack in the jobs market.