There are several things to understand.
The unemployment rate is simply people on unemployment as a percentage of those employed.
The unemployment rate does not include:
- People who have exhausted their benefits
- People working part time because they cannot find full time employment
- People collecting disability benefits
- People who are underemployed, like software engineers working in retail
In addition, while the overall unemployment rate may be low, that doesn't mean that every industry is doing well. Economies usually see growth in some sectors while seeing a decline in others. For example, in the USA in the 1990s, while IT was booming, the manufacturing industry continued to shrink.
Also, when the unemployment rate drops, wages go up, and people who have been collecting some kind of benefits often go off the roles and get employment. This also isn't counted.
Finally, there's what is called the "Labor participation rate", which is the real indicator. It is a function of people working vs people of working age. This one catches everyone.
So, if the unemployment rate is, say 4.0%, and the labor participation rate is at 63%. there is far more room for those people to jump in and make the competition more fierce than if the unemployment rate is at 4.5% and the labor participation rate is at 78%