That's the question that Neil Irwin poses in his Upshot piece. He points to the drop in the unemployment rate to 4.3 percent, coupled with a drop in the labor force participation rate, and the weak job growth of the last three months. The argument is that these factors taken together could mean that there just are not that many more people interested in working.
This is a possibility, but there are some important data points pointing in the opposite direction. First, it is worth noting that the biggest drop in the employment-to-population ratio (EPOP) occurred among women between the ages of 25 to 34. Their EPOP fell by 0.9 percentage points in May, from 72.3 percent to 71.4 percent. This is not a group that anyone expects to be dropping out of the labor force in large numbers. This looks like a fluke, which indicates the decline in EPOP reported for May may just be due to measurement error rather than something that actually exists in the world. (These data are erratic, so a movement like this is not uncommon.)
In terms of factors pointing the other way, wage growth actually appears to be slowing, with the year-over-year rate of increase in the hourly wage dropping to 2.5 percent compared with 2.7 percent earlier in the year. If we take the average of the last three months compared with the average of the prior three months, the annual rate is just 2.2 percent. We don't expect wage growth to be slowing as the labor market gets tighter.
Similarly, the percentage of unemployment due to people voluntarily quitting their jobs is relatively low at 11.7 percent. This is below the pre-recession levels, which often exceeded 12.0 percent and far below the peaks hit in 2000, which got above 15 percent. Workers still seem reluctant to leave a job if they don't have a new job lined up.
There also is no increase in the length of the workweek. At 34.4 hours the average workweek is 0.1 hour shorter than its duration two years ago. We would expect employers to try to be getting more hours out of each worker if they were having trouble finding new workers.
In short, while 4.3 percent is a relatively low unemployment rate (and below most economists' estimates of full employment) there are important ways in which the labor market does not look like one at full employment. Hopefully, the Federal Reserve Board will give us the opportunity to learn the answer to this question.