If those who left the labor force last month had still been looking for work, the unemployment rate would have risen to 7.5 percent in August.
"Pretty disappointing," said Beth Ann Bovino, senior economist at Standard & Poor's. "You saw more people leave the job market and fewer people get jobs. Not a good sign."
Back in 2000, the participation rate hit a high of 67.3 percent. At the time, women were pouring into the labor force. But women's participation fell modestly through the mid-2000s then dropped sharply from late 2009 through 2013.
Women's participation rate is now 57 percent. The rate for men is nearly 70 percent.
Another factor in the declining participation is that the oldest baby boomers have reached retirement age.
But Craig Alexander, chief economist at TD Bank Group, says "demographics cannot explain the amount of decline" in labor force participation.
Many Americans without jobs remain so discouraged that they've given up on the job market. Others have retired early. Younger ones have enrolled in school.
Some Americans have suspended their job hunt until the employment landscape brightens. A rising number are collecting disability checks.
"It's not necessarily people retiring," Bovino says. "It's young people going back to school" rather than taking their chances on a weak job market.
Labor force participation for Americans ages 16 to 19 was just 34 percent last month. That's near their record low of 33.5 percent set last year.
It isn't supposed to be this way. After a recession, a brightening economy is supposed to draw people back into the job market. But it hasn't happened. Labor force participation "certainly shouldn't be at current levels," Alexander says.
There aren't enough jobs being filled. Employers are hiring about 4.3 million people a month before layoffs, dismissals and resignations. In 2007, before the Great Recession, they were hiring 5.2 million a month.
There are three unemployed people, on average, competing for each job opening, compared with 1.8 when the recession began in December 2007.