Unemployment Rate Really Over 7%

Unemployed Dropping Out of Labor Pool

The share of the U.S. population working or actively seeking a job has fallen to 65.9 percent, the lowest level in 16 years. Economists say the weak jobs market is causing people to give up their searches and drop out of the labor pool at an unusual pace.

Americans not actively seeking work when the Labor Department conducts its survey of households are not counted as unemployed. Those people say they have stopped looking because of frustration or personal responsibilities, such as deciding to attend school.

That growing trend has caused the participation rate to fall 1.2 percentage points since the start of the recession in March 2001. This is the first time the participation rate has fallen 27 months into an economic recovery.

"Normally in a recovery the participation rate would rise,'' said Sung Won Sohn, Wells Fargo's chief economist. "People hear about the improving economy and more job opportunities so they actually come out of the woodwork. We are seeing the opposite of what's been normal in the past. That's why the jobless rate has really become somewhat of a misleading indicator.''

If those people who want jobs but aren't looking were counted, the unemployment rate would be more than 7 percent, said Mark Zandi, chief economist at Economy.com.

"To me, that is much more representative of the state of the job market,'' he said. "It doesn't feel like a 5.6 percent job market. It feels like more of a 7 or a 7 and a half percent job market.''