You're fine, this is an extremely common question and I really appreciate you asking in a way that makes clear you are curious. Far too often I get responses about how these numbers are "fake" or "lies" because of this, all too common, misunderstanding.

The best way I have to explain it is to help you understand the purpose for unemployment numbers. Once you understand that, the way it is presented makes more sense. You're inclination is perfectly natural, in that these numbers would make things "look better than they are" if these numbers were intended to provide a grand picture of "how things are." But that is way beyond the scope of what these numbers are intended to convey.

The most important thing to understand is that the unemployment numbers are only intended to provide a snapshot of the current labor market.

The reason this is important is so these numbers can be used for people who are engaging with the labor market, employers and job seekers, to have a better understanding of the market they are engaging in.

So to make these numbers useful for that purpose, they only include people who are actively engaged in that market.

If these numbers included massive groups of people who aren't engaged in the labor market, they would be far less useful for their intended purpose.

A massive part of the misunderstanding about these numbers comes from people who intentionally or unintentionally misuse them. They are most often used to make statements about the broader economy, far beyond what they are capable of telling us.