The federal government uses what is known as the Current Population Survey, a monthly survey of 60,000 households across the nation, to determine who is in the labor force and whether they are employed or unemployed. To be considered in the labor force, someone has to be employed, or available for work and has to have actively looked for work in the preceding four-week period.  Those who may want to work, but are so discouraged about their chances of finding a suitable job that they haven't actively sought one in the preceding four weeks, are not counted among the labor force. Consequently, they are not considered to be unemployed.

Labor Market = Candidate Market + Job Market

Only the jobless workers who are in the Candidate Market actively seeking work are considered.  What about the workers that have dropped out of the labor force or never entered the labor force because they felt they would not be able to secure meaningful work or need to cover daycare costs? 

To illustrate - from January 2001 to January 2009, the labor force participation rate dropped from 67.2% to 65.5%. If the labor force participation rate had not declined over this period, today there would be an additional four million workers in the labor force.  And if those missing workers were counted as unemployed instead of as not being in the labor force, the unemployment rate today would be over 10%...

A better measure is the underemployment rate - (sometimes referred to as the U-6 measure of labor underutilization) which is a more comprehensive measure of labor market slack than the unemployment rate.

The primary difference between the unemployment and underemployment rates is that the underemployment rate includes people who have had their hours cut or working part time who really want full-time jobs.  According to the DOL the number of involuntary part-time workers increased by 423,000 in March and by 4.4 million since the start of the recession. 

The underemployment rate increased sharply from 14.8% in February to 15.6% in March.  Now an estimated 24.4 million people-one in every six workers in this country-is either unemployed or underemployed.