Moving Towards Prosperity

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It's customary to deride mainstream media outlets as simply "reprinting press releases" from their favorite interest groups.  Well, color me guilty today, because this, from Ball State's Center for Business and Economic Research, is pretty interesting:

Many Americans are mired in a housing gridlock: They can't afford to sell their homes because property values have fallen, causing millions of people to owe more on their homes than they are worth. And, many can't move to take new jobs until they sell their homes.
 
Michael Hicks, director of Ball State University's Center for Business and Economic Research (CBER), has found the migration of people from one part of the country has nearly ground to a halt. He analyzed data from a variety of sources, including United Van Lines (UVL) migration numbers.
 
Fewer Americans are moving now than in any year since 1962, when the population was 120 million smaller.
 
"The economy is playing havoc, since property values have dropped significantly in the last few years," Hicks said. "Many people simply cannot just pick up and move. They have a home they have to sell first. 
 
"It many cases, one spouse moves to another state to work while the other stays home in their main residence in an attempt to sell it. With the current market, homes are selling at thousands less than what people paid for them a few years ago. Some people may just be stuck for a while until the economy improves and homes begin to sell again."
 
Since 1977, UVL has tracked where the firm takes its customers in the 48 contiguous states. UVL says Michigan is the No. 1 outbound traffic state for 2008. Nearly 67.1 percent of all Michigan-related United Van Lines traffic was leaving the state. Despite large job losses in the manufacturing sectors, Indiana actually gained population in 2008.

One of the justly celebrated strengths of the United States economy is its labor mobility.  By this account, at least, our housing market has basically destroyed that critical asset.

A recession like this is the worst time to lose your labor mobility.  I am quite convinced by the argument that since the 1980s, recessions have been characterized by structural, rather than cyclical, unemployment.  Rather than temporary layoffs of workers during periods of slack demand, modern recession-driven unemployment tends to result from the destruction of jobs, firms, even industries.  That's why long-term unemployment creeps up, and skilled workers are having a harder time than they used to during downturns:  it takes longer to match a skilled worker with an appropriate position than to slot body into a low-skilled place.

In those conditions, workers need geographic mobility to offer them a wider variety of potentially appropriate jobs.  But this time around, they're tied down by overpriced real estate and underwater mortgages.

The article suggests that families may pick up the strain, with one spouse staying behind to sell the house while the other spouse moves.  But that's a very temporary, and a very bad, fix--at best, that means trying to support two households rather than one on family income.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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