We May Be Closer to Full Employment Than It Seemed. That’s Bad News.

The May job numbers raise a depressing possibility: that this is as good as it will get for the United States labor market.

At first glance, the new numbers seem like a bit of a mystery. The unemployment rate fell to a 16-year low, yet job creation slowed and the number of people who are neither working nor looking for work rose. But the data aren’t really inconsistent. Rather, they point to a job market that is pretty close to full employment — where workers who want a job can find one fairly easily, but low unemployment isn’t pulling workers into the labor force en masse.

The big headline is a drop in the unemployment rate to 4.3 percent. That’s lower than it ever fell during the mid-2000s expansion, and you now have to go back to 2001 to find a moment as good. But the details of why the rate fell in May are terrible; the unemployment rate dropped for all the wrong reasons.

Instead of a decrease because more people are employed, the number of people who reported themselves as having a job actually dropped by 233,000. Meanwhile, the number of people not in the labor force at all — neither working nor actively looking for work — soared by 608,000.

Those are volatile numbers, and any one month probably doesn’t mean much. But over a longer horizon, the trend is still looking pretty soft. The great weak spot in the labor market in the last few years has been labor market participation — fewer adults have sought work at all, so they are not working but do not count as unemployed.

And while there had seemed to be some progress earlier in the year, the labor force participation rate is now only a tick above where it was a year ago. A rate rise from 62.6 percent to 62.7 percent over the course of an entire year is not much of an improvement.

Meanwhile, employers reported adding 138,000 jobs in May, fewer than analysts had expected. Over the last three months, the United States added an average of only 121,000 jobs — the lowest three-month average since 2012. That’s higher than the level of job creation that would be expected based on growth in the population, but not by much, and that figure was above 200,000 as recently as February.

These trends — labor force participation that is barely rising, fewer jobs being added, and a quite low unemployment rate — are all in line with one another. They’re what you would expect to see if the job market were close to full employment, a state where nearly everyone who wants a job can get one, and the great constraint on growth is the number of workers.

On one hand, that’s the goal. If the Federal Reserve judges that’s where the economy stands, for example, it will view its task of healing the job market as having been accomplished.

But one of the great hopes for the United States economy over the last few years has been that an improving labor market would pull back in many of the millions of people who left the labor force in the aftermath of the 2008 recession. At a micro level, that would mean more people earning a living; at the macro level, it would increase the economic potential of the nation.

And to be clear, there is still room for that to happen. The ratio of 25-to-54-year-olds who are employed fell in May, to 78.4 percent from 78.6 percent, but it is still plausible that it could rise back to its levels above 80 percent before the 2008 recession, or even to its record highs near 82 percent back in 2000.

You can imagine plenty of things that might cause that shift, including wage growth (working is more appealing if the paycheck is higher) and training programs to try to help people enter the work force. But the reality over the last year is that there isn’t much evidence that this is happening.

So there is still hope for America’s armies of nonemployed. But if we keep getting monthly reports like the one for May, we will have to grapple with the possibility that a low unemployment rate and plentiful jobs aren’t going to be enough to pull them into the labor market.