■ Despite recent economic weakness, the persistence of low unemployment reflects two opposing forces: rising worker discouragement and improvements in matching efficiency.

- These two forces were already placing downward pressure on unemployment before the COVID-19 crisis. As labor demand strengthened after the crisis, unemployment fell sharply and has remained low despite recent softening in employment conditions.

- Advances in matching technology and demographic shifts have substantially improved matching efficiency, continuing to push down the unemployment rate.

- At the same time, the increasing number of discouraged workers, especially among the young, has mechanically lowered the headline unemployment rate.

■ This implies that low unemployment does not necessarily signal improved employment conditions.

- A substantial share of the unemployment decline reflects young workers exiting the labor market. This suggests that, as the job creation capacity of firms has weakened and the labor market duality has deepened, a growing share of young people have become pessimistic about securing high-quality, regular employment and have stopped searching for work altogether.

- If these structural barriers that discourage job search among the young become entrenched, participation in an already shrinking workforce could decline further, posing risks to social cohesion.

■ Accordingly, efforts to improve matching efficiency should continue alongside measures to reduce labor market duality and strengthen incentives for workforce participation.

- It would be advisable to improve business productivity to create quality jobs, ease the labor market duality, and gradually align the education system with industry needs.

- Additionally, in-depth analysis of the growing “taking a break“ population should continue to inform the detailed design of mechanisms to help those who have been out of the workforce for extended periods return to work.