Surprisingly low unemployment makes some sense

The labour market data released this week was a positive shock to the system as the unemployment rate fell to a seven-year low of 5.3%. The result was not an indication of a rapidly strengthening labour market – employment growth of 0.9% over the December quarter was in line with our expectations. But the participation rate – the proportion of people either in work or actively looking for it – failed to rebound from last quarter’s large and unexpected fall, and is at its lowest level since mid-2013.