A little while back I argued that reduced job mobility is in part attributable to the bad housing market. There's been some new evidence against certain parts of this story that are worth sharing.
Adam Ozimek shares this new JEP paper, which argues that there is no relation between the housing crisis and declines in mobility. Ozimek concedes defeat... I'm not quite as willing because I have a few lingering questions about the paper. First, what's good that the paper points out is that there has been a consistent trend for a long time now of declining mobility, and in part of course anything going on now is continuing that trend. It also provides a detailed discussion of the wide differences between CPS, ACS, and IRS estimates of mobility that should give us pause. My biggest question is exactly why "underwater" houses should be driving this. The authors look at the state-level relationship between underwater houses and mobility and find a modest positive relationship. I'm not sure exactly what this is supposed to demonstrate. First, I thought if your house was underwater you had an incentive to walk away from it, so this sub-group of particularly bad-off homeowners ought to be more mobile, right? What I was initially thinking of were people like my parents, who are not underwater but who have taken a hit on both their 401k and their home value and aren't talking about moving now like they were a couple years ago.
So the article is worth looking at, but I still have questions.
The commenter Nonymous had a lot to say on my old post on this. Most of his comments weren't convincing - they amounted to cross-sectional observations that younger people were the most likely to be unemployed but the least likely to own a home. This is Casey Mulligan stuff. Bad inferences from relative differences. My comments from before still stand on all those points. But he also shared a paper that allegedly addressed this point, which I didn't get a chance to address. It presented evidence that there were declines in mobility, but that they were mostly within-county declines, which the authors argue shouldn't affect the labor market. Anyone familiar with the spatial mismatch literature in labor economics knows that this is wrong. Labor markets in urban centers and urban peripheries are different. Counties are big. Counties are not labor markets. If you have a car, the constraints of a cross-county job are less severe of course. But think about Los Angeles County. Think about Cook County. So I'm not sure why they're presuming that declines in within-county moves don't limit job mobility.
I obviously think the biggest problem for jobs is uncertainty and deficient demand, but the impact of the crisis on peoples' assets makes a difference too - particularly when we think about immobility. This JEP paper is worth reading, and I would say it makes me think that the housing market may be less important than I had originally thought - but I still have a couple of lingering questions and I wouldn't say it's not important.
24 minutes ago