Workers continued to drop out of the U.S. labor force due to sluggish hiring as the economy claws its way toward recovery from the worst downturn in decades.

While the jobless rate slid to 8.1 percent from last month's 8. 2 percent, the fall was due to more people giving up on the job hunt -- the unemployment rate only counts those actively seeking work -- amid frustration over their not-so-promising job prospects.

The U.S. Labor Department reported Friday that 342,000 workers dropped out of the workforce last month, and the labor force participation rate dropped to the lowest point since 1981.

Indeed, many employers are reluctant to hire those out of work longer than 27 weeks -- a group economists call as the "long-term unemployed" -- on the perception that their skills have become rusty.

And for those individuals, who for months or even years have pounded the pavement in search of a full-time job, the odds of finding one seem insurmountable, and they give up.

Not much hard research exists on why companies are less apt to hire those out of work for long stints, but Heidi Shierholz, economist at the Economic Policy Institute, said many employers believe skills can become rusty, although that perception may not gel with reality.

Employers could also view lengthy gaps in an applicant's resume as a red flag, believing it says something negative about the applicant, Shierholz added.

With so many people desperate for work, all bargaining power is in the employer's court and companies can have their pick from a plethora of qualified candidates, she said. Firms may even look for ways to weed out applicants, just to manage the tsunami of resumes that comes with every job opening these days.

Friday's jobs report found that the economy added 115,000 jobs in April, down from the previous month's 154,000 jobs. Nearly 23 million people remain out of work.

"Today's report was one with very little sunshine," said Doug Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office. "So little that 342,000 Americans simply gave up and went home," he told TV station Fox News, referring to the number of Americans who have thrown in the towel and stopped looking for work.

While many economists say the U.S. economy needs to add more than 200,000 jobs per month to get the country back to work, Holtz- Eakin believes 250,000 jobs are needed to match the country's rapid population growth. Shierholz tags the number at 350,000. Based on that logic, the economy would need to more than double last month's jobs growth.

BLEAK PICTURE FOR YOUTH

At this time of year, attention often turns toward new graduates and their job prospects.

"Though the labor market the class of 2012 will face is stronger than the one faced by last year's cohort, job prospects are still weak," Shierholz said.

For example, over the last 12 months, the unemployment rate among workers under age 25 with a bachelor's degree averaged 8.5 percent. This is an improvement from the average at this time last year, 9.6 percent, but is still much higher than the 2007 average of 5.4 percent.

WEAK GOVERNMENT EMPLOYMENT

Gary Burtless, a senior fellow in economic studies at the Brookings Institute, said the government employment continues to be a source of weakness, although that should soon come to an end.

Private payroll employment stopped shrinking in February 2010 and has grown in every month since. Over the same period, government payrolls have shrunk 502,000, or 2.2 percent.

This contrasts with what the country saw during the administration of former President Ronald Reagan, when the nation also suffered a severe recession, Burtless said.

After the 1981-82 downturn, government payroll employment increased 426,000, or 2.3 percent, in the first 26 months of the recovery. The severity of the current recession was worse than the one in the early 1980s, and the private-sector recovery has been weaker.

"Astonishingly, the public-sector employment response has exacerbated our current job market woes," Burtless said. " Shrinking government payrolls are creating a persistent headwind that is slowing the labor market recovery."