The unemployment rate counts people looking for a seat in the work group; it does not count every adult outside it.
Go deeper
In the main U.S. household survey, unemployed people generally have no job, are available for work and have actively searched during the past four weeks. People on temporary layoff expecting recall can qualify without an active search. The labor force combines employed and unemployed people; it does not include every adult.
People who are neither employed nor classified as unemployed are outside the labor force. This includes many retirees and students, as well as some people who want work but have stopped searching. Receiving unemployment benefits is not the test. Changes in participation can therefore affect the unemployment rate alongside changes in hiring or job loss.
Make it concrete
Hypothetical example: 96 employed people and 4 unemployed people form a labor force of 100. The unemployment rate is 4%, regardless of how many other adults are outside that group.
When you read a headline
Read participation and employment measures alongside unemployment. A lower unemployment rate alone does not explain whether people found jobs or left the labor force.