The headlines say the news is good.

Official unemployment in the U.S. dropped from 6.7 to 6.3 percent, the lowest rate in five years, as 288,000 nonfarm jobs were added, according to the Bureau of Labor Statistics (BLS).

The steep drop in the unemployment rate, however, was a function of more than 800,000 unemployed Americans dropping out of the job-seeking market altogether. Only 62.8 percent of working-age Americans are employed or looking for work, back to lows seen in December.

Some economists say that drop may reflect the end of unemployment benefits for some at the end of last year: no longer receiving benefits, some of the unemployed may no longer be fooling themselves (and BLS survey takers) that they're looking for work. And the monthly household survey actually found 73,000 jobs were lost last month. The New York Times explains:

It's tempting to try to combine the two surveys into one neat package and claim that the economy added jobs, albeit not enough to bring people back into the labor force. But that's not right. If you believe the household survey, the economy lost jobs. If you believe the business survey–which is much larger than the household survey–job growth was quite strong. They cannot both be right. The Times suggests a wait and see approach for anyone trying to claim the labor market is gaining strength. Job numbers for February and March, incidentally, were revised upward. Prior to the release of the jobs report, economists predicted 211,000 jobs were created last month.

The Wall Street Journal ran some reactions on the numbers from economists from across the spectrum. Some, naturally, dismissed the caution the conflicting numbers should warrant. Via WSJ:

The usual suspects will complain that the decline in the unemployment rate was largely due to a massive 806,000 drop in the labor force, which more than offset a disappointing 73,000 decline in the household measure of employment. But the household figures are notoriously volatile and the labor force had increased by about 1.5 million over the past six months. –Paul Ashworth, Capital Economics

Although the drop in unemployment this month can be explained by the participation rate, the drop in the participation rate merely reversed the rise in the previous three months. For the year to date, the participation rate is flat and the unemployment rate is down another 0.4 points. In short, the trend in employment remains more than strong enough to keep unemployment trending down. –Jim O'Sullivan, High Frequency Economics Writing in The Huffington Post, former Obama administration economist Jared Bernstein also advised caution over the numbers:

So, as my Grandma might have asked, what's not to like?

It's this: the decline in unemployment is entirely due not to job creation, but to labor force decline (employment actually fell slightly in the household survey). This important and closely watched indicator—the labor force participation rate—also fell 0.4 tenths, reversing recent gains and returning the lfpr to its low where it stood at the end of last year, commensurate with levels we haven't seen since the late 1970s. Though part of the recent decline in the participation rate reflects our aging demographics, more than half in my judgment is due to weak demand.

The BLS noted that the large decline in the labor force—about -800,000—was likely due to fewer entrants as opposed to more leavers. And this is a volatile number, as I stress below. But neither can it be dismissed out of hand: it has been essentially stuck at historically low levels for a while now. The U.S. dollar, meanwhile, gained against other currencies after the better-than-expected jobs report.