The staggering level of "discouraged workers" as the government calls them has swelled to historic proportions in 2010, past the million barrier for the first time since the Bureau of Labor Statistics has been tracking the number.

Though a bit off its all-time high of 1.2 million recorded in February, the metric stands as perhaps the most daunting statistic of last Friday's gloomy jobs report, which showed that almost all the new employment is coming from temporary government Census jobs and not the kind that will sustain an economy.

"The fact that people are sitting down indicates just how bad the market is for some categories of people," says Peter Morici, professor at the University of Maryland's Smith School of Business and the former chief economist at the US International Trade Commission.

That picture is unlikely to get any better, particularly in terms of the headline unemployment rate number on which most people focus. That figure actually dropped from 9.9 percent to 9.7 percent in May, but was as much a reflection that many people simply dropped out of the jobs market and are no longer counted as unemployed.

Even if those who have quit searching come back to the market, that will only keep the headline number high as the labor force increases.

"Now you're going to have the woodwork effect," Morici says. "All the people who were discouraged will be coming out of the woodwork to find jobs."

As the headline number has dropped from 10.1 percent in October 2009, the number of discouraged workers has jumped 34 percent, from 808,000 to 1.08 million.

The decline in active job-seekers, in fact, may be helping pad the employment picture at least on the surface.

"If it weren't for the plunge in the labor force, the US unemployment rate would have climbed to 10% in May," Gluskin Sheff chief economist David Rosenberg says in his morning note Monday. "[T]he household survey actually flagged a 35,000 outright decline in employment last month."

And the growth in discouraged workers—technically defined as those who haven't looked for work in four weeks—could well stay high for the foreseeable future.

The long-term unemployed—those who haven't worked for at least 27 weeks, or more than half a year—remains mired at 6.8 million, a number that accounts for 46 percent of the total jobless figure.

Ramifications of the credit crisis and the ensuing efforts companies made at doing more with less have helped depress employment as well. Company productivity rose 2.8 percent in the first quarter.

"We don't expect any substantial improvement to the labor situation at all," says Richard Hastings, macro and consumer strategist at Global Hunter Securities in Newport Beach, Calif. "Companies just don't need as much labor to drive as much output from technology and machinery. If you're in the wrong industry and you don't have a track record in the right skills in other industries, you're going to be a long-term stat."