Despite a Labor Department report last week touting Connecticut’s improving unemployment situation, a group of economists at the Connecticut Center for Economic Analysis say it’s a “smoke screen.”

The economists concluded in their last report of the year that if participation in the job market were the same as it was in the second quarter of 2010 then the unemployment rate is close to 10.7 percent, instead of the 7.6 percent reported last week by the Labor Department.

“So, while Connecticut’s sluggish recovery has not only failed to restore jobs lost since 2007, the state’s economic malaise [has] driven many adults out of the work force,” the center said.

The center found that about 65,000 working-age adults “simply stopped looking for employment during the last three years.” According to the Labor Department’s report last week, Connecticut has recovered about 63,500 positions, or 52.4 percent, of the 121,200 seasonally adjusted non-farm jobs that were lost in the state from March 2008 through February 2010 when the employment recovery began.

“Connecticut is one of the few states whose economy, whether measured in output or household income, is not close to its 2007 peak,” the center said in its report. “Job recovery has been equally slow, with barely a quarter of the jobs lost (since 2007) restored, with many of those who have returned to work going to lower quality jobs than the one they lost.”

The national economy plays a role too. “Connecticut has been directly impacted by budget cuts through decreases in SNAP (food stamps) and layoffs by private sector firms due to the October furloughing of federal personnel including inspectors of private sector output,” the center said. “Going forward, the abrupt loss of long-term unemployment benefits — which seems likely given their exclusion from the budget agreement — will further undermine both national and state recovery.”

Republicans used the report as evidence that Democratic Gov. Dannel P. Malloy hasn’t done enough to help improve the situation.

“The state’s unemployment rate has been artificially understated because there are far fewer people in the labor market now than just 2010,’’ House Minority Leader Lawrence Cafero said.

He said the report shows that more than 25,000 fewer residents have jobs than when Malloy took office in 2011.

Republican gubernatorial challenger Tom Foley said things are so bad under Malloy that he has “broken the spirit of the 60,000 Connecticut citizens who have quit looking for work since he was elected.”

But Malloy’s spokesman pointed out that the exercise detailed in the report was academic.

“While hypotheticals may make for interesting academic work, government must deal with reality,” Andrew Doba, Malloy’s spokesman, said. “And the reality is that unemployment is at its lowest level since 2009 and we have grown more than 40,000 private sector jobs since Governor Malloy took office — the largest gains in private sector employment since the late 1990s.”

Still, the center pointed out that “Connecticut has not created and sustained net new jobs in 25 years; current employment remains below the level of 1989.”

While Republicans may be happy to use the information in the report to their advantage, the party may or may not agree with the suggestions the center’s economists make for avoiding further erosion of employment in the state.

The center suggested that in order to drive short-term job creation, enhance state revenues, and build long-term competitive strength the state should dramatically accelerate public sector capital projects whose funding has already been approved and now exceeds $6.5 billion and unleash “a trove of accumulated tax credits to fund private sector capital projects.”

A previous report by the center found that the Malloy administration is sitting on $6.5 billion in bonding that has already been approved but has not been released by the state. That’s double the amount of money held back by former Gov. M. Jodi Rell’s administration.

However, the report praised the Malloy administration for its investment in economic development, including $291 million in Jackson Laboratory, and the tax credits and loans given out to large companies that agree to create more than 200 jobs.

Rep. Gail Lavielle, R-Wilton, said she believes there is a better way forward.

“It is disappointing that the CCEA report also does not take into account the feedback from business owners, suggesting only more government spending and incentives,” Lavielle said. “Even the most optimistic budget forecasts for the next biennium project a deficit of more than $1 billion. Spending more on debt service will exacerbate that figure. And tax credits are of little value to businesses struggling with persistent high structural costs.”

She said in order to grow jobs the state should consider cutting taxes. “A commitment to reducing taxes across the board will help businesses lower their structural costs and sustain the kind of long-term growth that fosters job creation,” Lavielle opined.