Why Underwater Mortgages Don’t Kill Jobs

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Lucy Nicholson / Reuters

If you’re wondering why you can’t find a job, don’t blame your underwater mortgage.

That’s the finding of a new study by economists Colleen Donovan and Calvin Schnure, which attempts to get at the roots of our stubborn joblessness problem. There are a lot of economists speculating that homeowners who can’t afford to pay off their mortgages are making it harder for everyone to land a good gig. These troublesome homeowners, the theory goes, can’t afford to move from their low-paying second-rate job in, say, Paduka, Kentucky, to their dream gig in Walla Walla, Washington because of their burdensome housing situation. The result is a stagnant labor market where fewer jobs are opening up, and more employers are wondering why they can’t find more people to fill the jobs on offer.

According to the study, in areas where housing price have fallen off a cliff, there are, as suspected, fewer people on the move within that area. However, there are also more people in those areas moving out of state in search of better jobs. The researchers conclude that this means big housing price declines actually trigger people to move further away, rather than holding them back. And Donovan, one of the study’s authors, says that’s a sign the economy is suffering less from “structural issues” like housing and skills mismatches and more from a lack of consumer demand due to the sluggish economy.

But here’s the problem with that logic, as I see it. When we talk about “structural” issues in the economy, we’re not just talking about whether people are financially capable of moving to get a better job. We’re also talking about people not having the skills needed to make it in this economy.  It’s worth remembering that the areas of the country where housing prices have plummeted the most, like Arizona and Florida, are also the states where jobs in construction and real estate were on a tear until the financial crisis hit. So it makes sense that those would be the areas where people are hell-bent on jumping ship, not just moving from one drowning housing market to the other, from, say, Fort Meyers to Tampa, but far far away, where housing doesn’t make up such a big part of the labor market or soak up nearly as much of your personal wealth.

What’s more, if more people are being forced to cross state lines to land a paying gig, couldn’t that mean that our skills problem is actually worse that we thought? Getting stuck in a mobility funk might not just be because your mortgage is under water, but because in this dismal job market, there’s nowhere better to go.