New Delhi, Aug. 27 -- Something strange is happening in the US labour market. The latest data released by the Bureau of Labor Statistics shows that the US economy lost 23,000 jobs in July, yet its unemployment rate actually fell to 4.1%. A closer look helps explain the apparent contradiction.

To be counted as unemployed in the US, a person must be actively looking for a job. Today, however, the job market is so bleak that people are giving up the search for work. Economists call this the 'discouraged worker effect.' As a result, the unemployment rate can decline even as demand for labour falls, because the supply of labour is shrinking even faster. Some estimates suggest that more than 2 million people have left the US labour force since...