The jobless rate, or unemployment rate is based on the number of people actually getting an unemployment check. Since you tend to only get a check for 6-12 weeks(IIRC, and except for seasonal workers), when you are no longer eligible to receive the check you are counted as one of the employed, even if you are not working. So as long as less people are applying than those that are leaving the gov.'s unemployment records you have a fall in the jobless rate.

Also if I remember correctly, a healthy economy should/needs to have about a 5-7% unemployment rate. This seems counter intuitive to most, i.e., no one being unemployed would seem like a better economy, but it isn't. A healthy economy needs to have about a 5-7% unemployment rate, so that you don't have to import labor, and it also prevents having to over pay your employees. I remember about 8yrs ago McD's was starting employees out at about $7.30 an hour here in NCA, well above the state's or Fed minimum wage, because they couldn't get people to work there. Of course that all ended once they started hiring illegals.