Got a Question About the Bad Economy? The Answer Is Housing


There might be no way to exaggerate the extent to which the Great Recession and the slowcovery is fundamentally a housing implosion surrounded by a bunch of ripple. (Just ask Dan Indiviglio.) Why do consumers feel so gutted? To begin with, a fifth of mortgages are underwater. Why is overall investment so horrible? For one thing, residential investment is 60 percent below its 2005 peak. You can't take full stock of unemployment without understanding that a fifth of the total job losses came from construction after 2008. And if you start asking about why the jobs aren't coming back, you have to start with the solar system of industries -- furniture, real estate, construction, architecture, etc -- that revolve around the housing market.

Below is one of those this-is-what-it's-all-about kind of graphs, via James Pethokoukis at AEI. It comes from a St. Louis Federal Reserve paper called Why Is Employment Growth So Low? It will not surprise you to learn that the answer comes back to housing. Between December 2007 and February 2010, employment declined by 9 million jobs -- 2 million of which came from the construction industry, where employment declined by nearly a third. The upshot: "The decline in construction accounts for nearly 40 percent of the total decline in employment between December 2007 and February 2010."

Here's the math behind that stat:

Assuming that about 1 million construction jobs were lost when the real estate bubble burst, we estimate that nearly 800,000 additional jobs were lost in other industries as a consequence. Hence, the decline in construction accounts for nearly 40 percent of the total decline in employment between December 2007 and February 2010.


Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

What Is the Greatest Story Ever Told?

A panel of storytellers share their favorite tales, from the Bible to Charlotte's Web.

Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus


The Death of Film

You'll never hear the whirring sound of a projector again.


How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe


A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.


I Am an Undocumented Immigrant

"I look like a typical young American."


Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion



More in Business

Just In