Goldman recently reviewed the recovery in unemployment rates during the past 10 recessionary periods since 1948. They seemed to take some comfort from the fact that unemployment rates had recovered back to 2007 levels, albeit over a slightly prolonged time period compared to previous recessions.

The decline of the unemployment rate to roughly its 2007 level provides a natural occasion to take stock of the recovery and ask whether the US economy has now fully shaken off any legacies of the crisis. There are certainly reasons to doubt that the economy is entirely back to normal, from the very low level of long-run interest rates to the fact that this recovery has been much more prolonged than the recoveries from other post-war US business cycles, as Exhibit 1 shows.

We admit their chart seems to do a good job of illustrating that even though the recovery took a little longer than normal the labor market has fully recovered to 2007 levels. Kind of makes you feel like things aren't that bad after all, right?

Unfortunately, the chart above is completely irrelevant because by analyzing the "unemployment rate" Goldman has answered precisely the wrong question (more on this shortly).

As such, we thought this was a good opportunity to illustrate the real recovery in the labor markets. Rather than looking at unemployment rates, however, we reviewed Unemployed Persons as a % of Civilian Non-institutional Population. As you can see, the graph below looks fairly similar to Goldman's chart with one glaring exception. Obama's 2007 labor market "recovery" is basically non-existent as people have not gone back to work they've simply stop looking and have dropped out of the labor force.

Effectively, by looking at unemployment rates, Goldman has simply highlighted how many people have dropped out of the labor force and called it a recovery. Nice try but we're not buying it.