Shrinking U.S. Labor Force Keeps Unemployment Rate From Rising

An exodus of discouraged workers from the job market kept the unemployment rate from climbing above 10 percent. Had the labor force not decreased by 661,000, the unemployment rate would have been 10.4 percent. The number of discouraged workers rose to 929,000 last month.

Source: Bloomberg, January 9, 2010

What is a discouraged worker? Explain how an increase in discouraged workers influences the official unemployment rate and U-4.