WHEN the going gets tough, it’s said, the tough get going. Sadly, this does not seem to apply to unemployed Americans any more. A high degree of population mobility has traditionally been one of America’s great economic strengths, providing a flexibility that allows for more efficient labour markets and lower unemployment. However, during this recession Americans have been hunkering down, not moving on according to an article in the Economist.
Declining mobility has in fact long been a feature of the post-war American economy, thanks to the ageing of its workforce and rising rates of home ownership. In the two decades after the second world war, the domestic migration rate hovered around 20%, but by 2000 it had fallen to under 15%. And amid the recent economic troubles mobility has declined even more.
There are exceptions. In the deep recession of 1981-82 domestic migration jumped from below 17% to almost 20%, driven by workers moving out of a deindustrialising Midwest. Between 2000 and 2001, in contrast, the migration rate fell from over 15% to under 14%. Today workers are all but stuck, thanks to the paralysing effect of the housing bust. Nearly one in four mortgage borrowers owe more on their loans than their homes are worth. These “underwater” borrowers face a stark choice: foreclosure or staying put. Millions of Americans now find themselves pinned down in places where unemployment rates are well above the national average. In 2008 the domestic migration rate was just under 12%, and the rate of migration between states fell to 1.6%—less than half the level that prevailed in the post-war decades.
One might expect the problem to be most severe in the bubbliest of markets, where homeowners routinely find themselves owing twice the value of their homes. In fact, the opposite is true. High rates of foreclosure in bubble states have freed workers to leave for more promising markets, including the once too-expensive cities from which such migrants previously fled. The reversal of fortune has been abrupt for former magnet states such as Florida and Nevada (see chart). In 2005, over a quarter of a million Americans moved to Florida. During the past two years the state has experienced a net population loss to other states of 50,000 people.
A few bright spots have managed to attract mobile Americans. Texas and Oklahoma weathered the downturn better than most, thanks to strong local energy industries and the absence of a housing boom and bust. The same is true for the Washington, DC, area, where an all-but-recession-proof economy based on the federal government has already managed a return to pre-downturn output levels.
Slowing migration has, ironically, helped California, among the most economically battered of states. California’s housing boom coincided with a large increase in out-migration, as expensive housing drove residents to neighbouring states. Those neighbours no longer seem so attractive next to increasingly affordable, entertaining and surf-fringed California. Between 2008 and 2009 fewer than 100,000 Californians left the state, the best performance since 2003.
In some parts of the country the decline in out-migration may be a welcome sign. In the north-east population loss began slowing in the middle of the decade, thanks to a broad-based economic revival. But elsewhere, falling migration means little more than pain. In Michigan the rate of population loss declined between 2008 and 2009, even as the unemployment rate soared above 15%. Workers whose jobs have disappeared for ever are, for a variety of reasons, unable to move on.