One of the many startling results in Friday's unemployment report for June was how few American adults are currently employed. Even though the unemployment rate is technically 9.2%, the employment-population ratio fell to 58.2%, matching its recession low. But it might help to put this number into perspective: just how bad is it?

Here's the historical chart for the employment population ratio (green), with the unemployment rate also plotted (red) using the right axis:

unemp-pop ratio 2011-06.png

Prior to this recession, the unemployment-population ratio hasn't been this low since 1983. At that time, it actually dropped all the way down to around 57%. But it didn't have as far to fall, having maxed out at just 60% in the years prior. Prior to the recent recession, the ratio was above 63%.

You can see that the employment-population ratio moves in opposition to the unemployment rate. But something strange has been happening this year. The strong inverse relationship isn't holding.

You can see this towards the end of the chart. In December, the unemployment rate began falling, but we haven't seen a corresponding increase in the employment-population ratio. In June it was at 58.2% while the unemployment rate was at 9.2%. But the other two times during this recession when the ratio was that low, the unemployment rate was 9.8% and 9.9%, in November 2010 and December 2009, respectively.

What does this mean? It likely indicates that more discouraged or otherwise marginally attached workers have temporarily exited the workforce since December. So the unemployment rate likely understates the problem, given the very low portion of the population that is employed. How understated is the problem? We can't know for sure. Some of these Americans might have left the labor market for good, if they're part of the aging population that has retired. We'll have to wait to see how many of these people reenter the workforce in the months and years to come.