Let’s put the pieces of the puzzle together. The unemployment rate fell in September by 0.2 percent points, from 6.1 to 5.9 percent. There was also a decrease in the sheer number of unemployed people—down 329,000 from August. On its face, this sounds like good news.

At the same time, the employment-to-population ratio has remained 59.0 percent for four months running. If the unemployment rate dropped and the employment-to-population ratio remained the same, the missing part of the puzzle is the labor force participation rate. In September, the labor force participation rate dropped to 62.7 percent. The last time the labor force participation rate was this low was February 1978. And, the biggest drop in labor force participation was among prime-age workers, 25-54 years old.

Over the last year, the labor force participation rate fell 0.5 percentage points. Therefore, it’s not surprising that missing workers—potential workers who are neither working nor actively seeking work due to the weak labor market—are at an all-time-high of 6.3 million. The vast majority of them (3.4 million) are 25 to 54 years old.

To put the official unemployment rate in perspective, the figure below shows the actual unemployment rate and the unemployment rate if the missing workers were in the labor force looking for work and thus counted as unemployed. The unemployment rate including the missing workers sits at 9.6 percent, the same rate for the last four months. Perhaps, this is a better indication of the slack in the labor market and the reason why wage growth has remained so sluggish even with a falling unemployment rate.