Are Unsellable Homes Holding Back Job Growth?

Many economists have argued that the continually deteriorating housing market may be holding workers back from relocating to areas where jobs are more plentiful. If you can’t sell your home in Detroit, where the unemployment rate is 11.6 percent, you’re not able to move to Fargo, where the rate is a mere 3.5 percent. That creates a geographic mismatch in the labor market, and keeps job growth lower than it might otherwise be if workers were more mobile.

A new study from researchers at the Federal Reserve Bank of Chicago calls this assumption into question. The researchers looked at Census data on state-to-state migration patterns through the summer of 2010, paying special attention to migration of renters versus homeowners. Homeowners always have lower migration rates than renters, but if “house lock” was unusually problematic in recent years, you would expect that the two migration rates would move in opposite directions; homeowners would move less than they usually do, while renters would continue moving at the same rate as they do during a normal economy, or even faster.

The authors also found that states with unusually bad housing busts did not have appreciably lower emigration rates, either. They concluded: State-to-state migration rates among homeowners fell roughly in line with those of renters during the latest recession and early recovery period and roughly in line with previous recessions. Moreover, there is little evidence that migration varied based on the magnitude of a state’s recent house price decline or the employment status of the household head. Given our findings and the significant amount of other current evidence, we conclude that there is little empirical evidence that house lock has been an important driver of the recent high unemployment rate.

That’s not to say worker-job mismatch is totally absent. While economists generally agree that the jobs crisis is primarily cyclical — that is, related to temporarily low demand — there are reasons to believe that at least some of the problem is structural.

Published by Stout Law Firm

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