Employment and Housing: Misery Loves Company

The official unemployment rate is stuck at 9.7%, but as Dan Indiviglio writes there's a lot going on under the hood of that number. Read his piece here. I waned to add a bit of garnish to his analysis, and I found some in this fascinating graph from Calculated Risk. It compares unemployment to mortgage delinquencies for each state and finds -- not surprisingly -- a strong relationship. Not every state is labeled, but Michigan, California, Florida, Arizona and Nevada are. They're all on the high end of both unemployment and mortgage delinquencies. They're also a part of the five-headed hydra of economic pain: Yes, I'm talking about MichiCaliFlAriVada.

The Great Recession grew to become much more than a housing crisis, but this graph reminds how critical the housing crisis was in instigating the recession and how ongoing weakness in the market continues to plague the economy. Two years ago, the worst of the foreclosure crisis was limited to four states: Florida, California, Arizona and Nevada. Today it's a national scourge, but those four states and Michigan continue to appear near the top in the nation's worst economic indicators.

Unemployment and weakness in the housing market feed off each other. Without jobs, families can lose their homes. Weakness in strong housing markets can devastate real estate employment (ask Florida). The administration's housing credit is set to expire in two months. With the Fed winding down its MBS purchases at the same time, mortgage rates could begin to inch up by as much as a percentage point, further squeezing the weak housing market. That makes Congress' action on unemployment all the more significant, as CR explains:

Imagine if there were no unemployment benefits. As Mark Thoma noted yesterday, Unemployment Compensation has Broad Based Benefits, but one benefit he didn't mention is that it keeps households in place. Even though there is a relationship between the unemployment rate and the delinquency rate, I suspect the trend line would be steeper without unemployment benefits (so there would be even more delinquencies as the unemployment rate rises without benefits).

For more on why unemployment benefits are key to economic recovery, go here.