When unemployment fell to 8.6 percent last month, its lowest rate in two-and-a-half years, some newspapers hailed the number as a sure sign that the recovery is back on track. But when you dig into the numbers behind the numbers, a darker picture comes into focus. It's not just that jobs are growing. It's that the labor force is shrinking.

The Economic Policy Institute captures the incredible shrinking work force in a chart today that shows the share of the population employed last month--58.5 percent-- is the same as when the unemployment rate peaked. Growth in employment has barely kept pace with the growth of the working-age population, they report.

Who's dropping out of the labor force? Perhaps surprisingly, it's mostly the people who didn't drop out of high school. And the drop-outs are accelerating.

It would be interesting to see this broken down by age to determine if most of the drop-outs are retirees, or women choosing to stay home with their children, or otherwise discouraged middle-age men and women.

I've said before that as a general rule, the more you learn, the more you earn, and the more likely you are to be employed. Unemployment is highest among the least educated and lowest for the most educated (see graph below). So it's interesting that worker participation in the last two years hasn't followed the same trend. Instead, college graduates have dropped out of the labor force at a higher rate than non-high school graduates; although that's partly because college graduates started at a higher worker participation rate.

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