1.21 million people considered "discouraged workers"

From CNN (link):

A record 1.21 million people want to work, but said they aren't looking because of the weak labor market, according to federal statistics released Friday. The June figure is up from 793,000 a year ago.

The labor force, in general, has shrunk over the past two months, contracting by 974,000 people as they lost confidence in their employment prospects. That reverses part of the gain of 1.7 million workers in the first four months of 2010, when a wave of optimism flowed through the nation.

More people may have stopped looking for work because their jobless benefits are expiring, wrote Deutsche Bank economists Joseph LaVorgna and Carl Riccadonna in a note. To collect unemployment benefits, people must be actively seeking work.

As the labor force contracts, the unemployment rate falls. This is one reason why it dropped in June from 9.7% the month before.

"The decline in the unemployment rate is not a reflection of strength, but rather a sign of discouragement among the ranks of the unemployed," the economists said.

This is why it's important to remember when the unemployment rate drops that it is the total number of jobs and the number employed that need to be taken into account. Some estimate the number of those who have given up searching for a job to be much higher.