The unemployment rate is dropping for one reason: People are giving up looking for work, and if you are not looking for work, you are not unemployed. In August, 368,000 Americans gave up. Here is a graph from last February provided by the Republican Study Committee. It shows the number of people in the labor force continuing to drop. To see a larger version, click here.
In fact, according to Americans for Limited Government, 86,000 fewer people are workig today than when president Obama first took office.