Recessions, Housing Market Disruptions, and the Mobility of Workers

Article excerpt


At the end of September 2010, the United States Census Bureau released the 2009 data from the American Community Survey (ACS). One of the questions that participants are asked in this survey is where they were living one year ago. The answer to this question is of particular interest to labor economists since it is one way to assess the degree to which workers are moving around the country to pursue jobs or educational opportunities. Data from the past 10 years of surveys reveal that the fraction of the population living in the same house as they were one year ago has fluctuated between 83.5 percent and 85.5 percent.


The fraction of the population living in the same house as a year ago appears to vary with the business cycle, rising with recessions. The fraction hit a high during the recession of 2001 and remained high for several years before falling to a low in 2005. It rose again during the recent recession of 2007 to 2009.

One might expect labor mobility to look very different in those two recessions, since housing market problems were such an integral part of one and not the other. Home prices fell sharply and foreclosure rates rose steeply during the most recent recession, but not during the 2001 recession.

However, while related, housing-price declines and foreclosures can have countervailing effects on mobility. A foreclosure makes it less likely that people will be living in the same house that they were living in a year ago. On the other hand, if housing prices fall so much that homeowners are left owing more to the bank than their home is worth, they are more likely to stay in their home. In order to move, they will either need to sell the house for less than the remaining balance on the loan, come up with the difference, and bring it to the closing, or they will need to default on the loan and let the bank foreclose. To the extent that a homeowner is unable to come up with enough money to pay off the difference and unwilling to default and suffer the damage to their credit history, they may be less likely to move than they otherwise would be. Economists refer to this phenomenon as, "spatial lock-in." Some observers have expressed concern that it may prevent workers from moving to cities where employment opportunities may be better than where they are currently living.


Data from the ACS show that the fraction of the population living in a different state from one year ago also fluctuates with the business cycle. …