Political pundits love to obsess over the unemployment rate. “Can President Obama win reelection if unemployment stays above 8 percent?” “What number for unemployment is bad news for the president, and what number helps him out?” But that talk is detached from the reality of the economy. Small businesses around the country know that there’s still an employment problem, even as the official unemployment rate drops from a high of 10.1 percent in 2010 to 8.1 percent today.

From my time talking with fellow small business entrepreneurs around the country, I’ve seen that times are still tough. But that doesn’t seem to match up with the changes in some of the official statistics, most notably the unemployment rate. The rate drops and drops—even when the jobs reports come back with disappointing numbers! Small business owners are wondering, “What’s going on here?”

What’s going on really gets at some of the limitations of the statistics we’re using. The unemployment rate is simple to explain, but it’s not telling the whole story. The problem with officials citing the unemployment rate, and pundits counting on it to inform their predictions, is what it leaves out. The model is not reflecting the experiences of real Americans who are struggling.

The difference between statistic and experience is exposed when you look a little deeper, at the participation rate. The unemployment rate only factors in the labor force: people who are either working or actively looking for work. If you’re not actively looking, you don’t count toward the unemployment rate.

The participation rate, on the other hand, asks how large the labor force is compared to the total population. And the participation rate has been dropping steadily, and is now at its lowest level in more than 30 years! Nearly 4 million Americans have just left the labor force, representing both a drop in the unemployment rate—and continued pain in the lives of real people.

Keith Hall, the commissioner of the Bureau of Labor Statistics from 2008 to 2012, wrote for US News and World Report, “Since the start of the recession we have also encountered the largest disengagement from the labor force in more than 60 years. . . Unfortunately, labor force disengagement is entirely responsible for the nearly 2 percentage points decline in the unemployment rate from 10 percent to 8.1 percent.”

The Wall Street Journal editors offered a few theories as to why the participation rate continues to drop:

• Demographics. America’s population is aging, as we all know, and more Americans who are still considered in the working age group are old enough to retire.
• Slow Job Growth. Because the recovery has featured slower job growth than expected, there has been little incentive for people who left the work force to come back. And older workers who lose their job might choose to retire rather than fight for one of the few available jobs.
• Low Wages. If wages for available jobs are not high enough, second-income workers might decide it’s more worthwhile to stay home.
• Entitlements. Government entitlement programs have expanded dramatically in the last decade, including Medicare, disability payments, and food stamps. Some potential workers might be disincentivized to rejoin the labor force, because they would lose these benefits.

When we get our economy going again, small business owners will be able to tell. The statistics might indicate some things, but don’t be afraid to dig deeper and get at reality.