Falling Labor Participation Drives Improved Unemployment Rate

Fewer people looking for jobs gives the stats a shot in the arm

Employers created a surprisingly large number of jobs in February, but it wasn't strong enough to prevent many Americans from leaving the workforce.

Nonfarm payrolls grew by 236,000, the Labor Department said Friday, well above forecasts of 171,000. The unemployment rate dropped to a 4-year low 7.7%, beating expectations for a smaller dip to 7.8%.

But some of that improvement was due to fewer people looking for work. The household survey that determines the jobless rate found that 170,000 more people were working, while 130,000 dropped out.

The labor participation rate fell to 63.5% from 63.6%, returning to the low reached last summer and matching the lowest level since 1981. If it had stayed at the pre-recession rate of 66%, unemployment would be 10.7%.