Labor Force Participation

So recently I've been tracking statistics for not just the unemployment but also under-employment.  I stumbled upon a statistic for Labor Force Participation that actually shows the number of people (expressed in a percentage) that carry jobs.  The report shows that Labor Force participation has dropped from about 67% (in jan 08) to about 64% (current).  I find this statistic particularly interesting especially when our government keeps talking about creating new jobs, and how the unemployment rate is dropping down.  Let me explain a bit of how the economy trends are actually going.

Current unemployment is reported at about 9%-10%, Underemployment sits at about 19%-20%.  So 10% of the reported workforce does not have a job, and another 10% want better jobs, either full-time instead of part time etc.  And this is just people that speak up about it.  These two statistics have been largely static for the last year or so.  But how can the Labor Force Participation drop when unemployment and underemployment have leveled off?

It's quite simple really, people stop looking for jobs because they are so disheartened by the current job market.  While labor force participation keeps dropping, the government keeps telling us how the unemployment is going down, or not increasing.  In all reality the economy is still in a downward spiral.  In fact labor force participation has dropped almost 2% in the last year alone.  A 2% decrease may not seem like much, but that's 2.2 million people no longer with jobs or no longer looking.  Right now we are sitting at a 26 year low, close to how times were in the recession of '84.

http://www.zerohedge.com/article/labor-force-participations-plunges-fresh-26-year-low
http://www.gallup.com/poll/125639/Gallup-Daily-Workforce.aspx