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ESSAYS ON ISSUES
	

	 THE FEDERAL RESERVE BANK	
OF CHICAGO

SEPTEMBER 2011
	 NUMBER 290

Chicag­ Fed Letter
o
How much has house lock affected labor mobility and the
unemployment rate?
by Daniel Aaronson, vice president and economic advisor, and Jonathan Davis, associate economist

This article explores new evidence from the U.S. Census Bureau’s Survey of Income and
Program Participation (SIPP) on the extent to which “house lock”—the reluctance of
households to sell their homes in a declining house price environment—has contributed
to the elevated unemployment rate since 2008.

Many have speculated that house lock

may create a geographic mismatch between the locations of available workers
and jobs vacancies, potentially leading
to persistently higher
unemployment. We
1. Migration rates: Homeowners vs. renters
test for the possibility
migration rate
of house lock by com0.025
paring state-to-state
migration rates of
0.020
households that might
be directly affected
by declining home
0.015
prices (homeowners,
particularly those in
0.010
states with large house
price declines) with
0.005
migration rates of
households that are
0
not directly affected
1984 ’86 ’88 ’90 ’92 ’94 ’96 ’98 2000 ’02 ’04 ’06 ’08 ’10
(renters). (See figure
Homeowners
1.) We use the SIPP,
Renters
which has particular
Notes: Data displayed are six-month moving averages of seasonally adjusted
four-month state-to-state migration rates. The shaded areas indicate official periods
strengths for studying
of recession as identified by the National Bureau of Economic Research. Several
gaps in the time series exist because one cohort had completed the full set of
this question.
waves (four-month periods) before the next cohort began.
Source: Authors’ calculations based on data from the U.S. Census Bureau,
1984–2010 Survey of Income and Program Participation.

We find that through
the summer of 2010,
state-to-state migration
patterns are inconsistent with a large role
for house lock in persistently higher
unemployment. This result supports
previous work using different data and
methods.1 In particular, we find that
the migration rates of homeowners

and renters moved roughly in tandem
during the recent recession and early
recovery period. There is also no evidence that migration rates fell more
among homeowners in states that experienced large house price declines
or among homeowner households
headed by an individual not working.
Background

The unemployment rate, particularly
since early 2009, has exceeded what
would have been expected based on
past associations between the unemployment rate and growth in economic
activity—a negative correlation that is
often referred to as “Okun’s law.” Indeed,
at the end of 2010, this relationship
underpredicted the rise in the unemployment rate by roughly 1.5 percentage
points.2 An underperforming labor
market may be partly due to the inability
of employers to find suitable workers,
which is often referred to as mismatch.
Concern about mismatch is best illustrated by the pickup in job openings
during late 2009 and 2010 that still has
not translated into a meaningful improvement in hiring.3
A number of researchers have looked
for specific evidence of mismatch by
exploring whether the demand for labor
shifted from industries, occupations,
or skills in relative decline to ones that

2. Migration rates: Current episode vs. past cycles
		
		
	
2005–07	

Current episode			
Dec. 2008–
July 2010	

Recessions	

Difference

Homeowners	
	

0.0025	
(0.0002)	

0.0019	
(0.0002)	

–0.0006	
(0.0003)	

0.0029	
(0.0001)	

0.0023	
(0.0002)	

–0.0006
(0.0002)

Renters	
	

0.0098	
(0.0007)	

0.0085	
(0.0005)	

–0.0013	
(0.0009)	

0.0114	
(0.0002)	

0.0096	
(0.0006)	

–0.0018
(0.0007)

Difference			
			
Sample size
Homeowners	
Renters	

Difference	

Expansions	

1984–2001

–0.0008			
(0.0010)			

–0.0012
(0.0007)

in January 2008, others in February 2008,
etc.) allows us to compute migration rates
by month, but the monthly migration
rate represents the share of households
that moved between states four months
ago (between waves). Unfortunately,
there are several gaps in the time series,
including during 2008, because one
cohort had completed the full set of
waves before the next cohort began.
Results

98,473	
42,852	

70,161	
35,121	

715,759	
347,156	

67,736
34,992

Notes: Average seasonally adjusted four-month state-to-state migration rates for each period are shown. Columns and rows may
not total because of rounding. Bootstrapped standard errors clustered at the individual level are in parentheses.
Source: Authors’ calculations based on data from the U.S. Census Bureau, 1984–2010 Survey of Income and Program Participation.

are growing. Reallocation like this can
obviously be very costly and time-consuming; while workers and firms make
transitions due to this type of reallocation, job openings may remain unfilled
despite a large pool of available workers.
Of course, reallocation like this is always
going on in a dynamic economy, so
the key question is whether it picked
up over the past few years.
An aspect of mismatch may be geographic in nature. In such a case, moving to
a labor market with better opportunities, like investing in more training or
education to improve skills, can raise
an individual’s employment prospects.
It is important to note that migration
across labor markets tends to be mildly
procyclical (i.e., it rises during expansions and falls during recessions).4 But,
recently, this cyclical decline may have
been reinforced by the housing bust
and the resulting hit to housing wealth.
If a household is stuck with little or negative home equity, it may be difficult to
produce a down payment for a new loan
on the next home, thus hindering jobrelated moves. There may also be incentives for a household to stay in a home
and strategically default on a mortgage,
thereby passing up job opportunities
elsewhere. House lock, like other potential impediments to job matching,
implies that the “steady-state” rate of
unemployment (the nonaccelerating
inflation rate of unemployment, or
NAIRU) has gone up. A higher NAIRU
implies less slack in the economy.

Data

Our analysis of house lock is based on
the SIPP—a large representative sample
of households interviewed every four
months (called a “wave”) for two to four
years. The first SIPP panel begins in 1984,
with new cohorts added roughly when
the previous cohort’s survey cycle is completed. The latest group entered the
survey in 2008, and we use data for this
group through July 2010. The sample is
based on nonmilitary households with
a head between the ages of 25 and 59.
This leaves approximately 21,000 households per year or over 1.4 million
household–wave observations between
1984 and 2010.5
The SIPP is useful for looking at migration behavior for several reasons. First, it
follows households for a fairly long time
and contains a wealth of demographic,
labor market, and housing information.
Second, unlike the U.S. Bureau of Labor
Statistics’ Current Population Survey (which
tracks households at fixed addresses),
the SIPP tracks households when they
move from one residence to another.
Therefore, we know explicitly whether
the households moved, as opposed to
leaving the sample for some other reason,6
and also whether they left for a new
labor market.
We define a labor market as a state
and, therefore, a move as a change in
state of residence between waves.7 The
overlapping nature of the survey (e.g.,
some households begin the 2008 SIPP

Figure 1 plots four-month state-to-state
migration rates for homeowners (black
line) and renters (blue line). The figure
highlights the infrequency of moves
across state lines. In a given year, fewer
than 2% of all SIPP households cross a
state border.8 State-to-state migration is
particularly uncommon for homeowners;
renters are about three to four times as
likely to switch states—a pattern that holds
throughout the sample period. Consequently, over the past 25 years, a significant portion of geographic reallocation
of households has been due to those
unencumbered by selling a home.
In figure 2, we compare the average fourmonth state-to-state migration rates during
the 2005–07 period (first column)—the
final three years of economic expansion
before the recession9—with those of the
December 2008–July 2010 period (second
column), which are based on the most
recent data available. We find that homeowner migration rates (first row) fell
from 0.0025 during 2005–07 to 0.0019
during December 2008–July 2010—a
decline of 0.0006 (annualized, roughly
0.0006*3 = 0.0018, or about two-tenths of
a percentage point). But renter migration rates (second row) dropped as well.
The row labeled “difference” compares
the patterns between the two groups.
We find that homeowner and renter
migration rates fell roughly in tandem.
The difference is economically small and,
as shown by the standard error in parentheses, statistically indistinguishable from
zero. Moreover, the results are very similar if we compare the December 2008–
July 2010 migration rates with those of
the entire 2002–07 economic expansion.
How do these patterns compare with
previous recessions that lacked large
national declines in house prices? In the

3. Migration rates, by state house price and work status
		
	
2005–07	

Dec. 2008–
July 2010	

Difference

Large-price-decline states (above median)
Homeowners	
	

0.0020	
(0.0002)	

0.0017	
(0.0002)	

–0.0004
(0.0003)

Renters	
	

0.0087	
(0.0007)	

0.0078	
(0.0006)	

–0.0008
(0.0009)

Difference			
			

–0.0004
(0.0010)

Small-price-decline states (below median)
Homeowners	
	

0.0032	
(0.0004)	

0.0023	
(0.0003)	

–0.0008
(0.0004)

Renters	
	

0.0121	
(0.0014)	

0.0097	
(0.0010)	

–0.0024
(0.0018)

Difference			
			

–0.0016
(0.0019)

Household head is unemployed or not in labor force
Homeowners	
	

0.0037	
(0.0005)	

0.0029	
(0.0005)	

–0.0008
(0.0007)

Renters	
	

0.0104	
(0.0015)	

0.0092	
(0.0010)	

–0.0012
(0.0019)

Difference			
			
			
Household head is employed

–0.0004
(0.0020)

Homeowners	
	

0.0022	
(0.0002)	

0.0017	
(0.0002)	

–0.0005
(0.0003)

Renters	
	

0.0096	
(0.0008)	

0.0082	
(0.0006)	

–0.0014
(0.0011)

Difference			
			

–0.0009
(0.0012)

Notes: Average seasonally adjusted four-month state-to-state migration rates for each
period are shown. Columns and rows may not total because of rounding. Bootstrapped
standard errors clustered at the individual level are in parentheses. In the top half of the
figure, the sample is split into above- and below-median price decline categories based
on state house price changes between 2007:Q2 and 2010:Q2.

the local housing bust.
In particular, if house
lock is important, it
should adversely affect
those households residing in states with
large house price declines. But the top half
of figure 3 shows this
is not the case. During
2009 and early 2010,
homeowner state-tostate mobility rates
decreased more for
households residing
in states that experienced better home
price performance
(i.e., small-price-­
decline states). Indeed,
we separately looked
at the five states that
experienced the largest
housing price declines
between 2007 and 2010
(California, Florida,
Nevada, Arizona, and
Rhode Island) and still
found no evidence
that homeowners were
migrating out of these
states at a historically
unusual rate.

Sources: Authors’ calculations based on data from the Federal Housing Finance Agency,
House Price Index, from Haver Analytics; and U.S. Census Bureau, 1984–2010 Survey
of Income and Program Participation.

fourth, fifth, and sixth columns of figure 2, we compare the average four-month
state-to-state migration rates during
economic expansions and recessions in
the period 1984–2001. We find that fourmonth homeowner migration rates were
about 0.0006 lower during the 1991 and
2001 recessions than during the 1980s
and 1990s expansions—the same difference as that between the 2005–07 and
December 2008–July 2010 periods. Renter
mobility rates in the earlier periods also
behaved fairly comparably with those of
the current episode. Indeed, given the
extent of the downturn in 2008–09, the
decline in homeowner and renter mobility
was rather tame this time around.10
It is possible that the renter–owner comparison still masks differences in mobility patterns based on the magnitude of

Finally, we found no
evidence that homeowner households
with a head out of work were especially
unlikely to move across states during
December 2008–July 2010 (see the
bottom half of figure 3). This result
casts further doubt on the importance
of house lock as an explanation for the
high unemployment rate in 2009–10.
Two brief caveats

With the current data, we are restricted
to using state as the definition of a local
labor market. But in large states, there
may be many separate local labor markets. Preliminary evidence from the SIPP
suggests that homeowner in-state migration fell during 2009 and early 2010,
while renter in-state migration fell less.
If homeowner in-state moves within a
local labor market were not completed,
the decisions to stay put would have little

bearing on geographic mismatch and
the unemployment rate. However, if
homeowner in-state moves between distant labor markets (e.g., San Francisco
and San Diego in California) were not
completed, the decisions to stay put
might suggest some role for house lock
after all.
Another issue is that while we do not
see a lot of evidence of geographic mismatch driven by house lock in the data
through mid-2010, the unemployment
rate was still around 9.5% that summer.
Once the demand for labor picks up, it
may very well be that concerns about
geographic (as well as sectoral or skills)
mismatch will come to the fore.
Conclusion

Unemployment may be high partly
because of the inability of employers to
find suitable workers. Part of this mismatch may be geographic in nature:
Available workers may not reside where
jobs vacancies are. Some observers have
speculated that house lock is a major
factor in recent mismatch.
We find that state-to-state migration
rates among homeowners fell roughly
in line with those of renters during the
Charles L. Evans, President  Daniel G. Sullivan,
;
Executive Vice President and Director of Research;
Spencer Krane, Senior Vice President and Economic
Advisor ; David Marshall, Senior Vice President, financial
markets group  Daniel Aaronson, Vice President,
;
microeconomic policy research; Jonas D. M. Fisher,
Vice President, macroeconomic policy research; Richard
Heckinger,Vice President, markets team; Anna L.
Paulson, Vice President, finance team; William A. Testa,
Vice President, regional programs, and Economics Editor ;
Helen O’D. Koshy and Han Y. Choi, Editors   Rita
;
Molloy and Julia Baker, Production Editors  Sheila A.
;
Mangler, Editorial Assistant.
Chicago Fed Letter is published by the Economic
Research Department of the Federal Reserve Bank
of Chicago. The views expressed are the authors’
and do not necessarily reflect the views of the
Federal Reserve Bank of Chicago or the Federal
Reserve System.
© 2011 Federal Reserve Bank of Chicago ­
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ISSN 0895-0164

latest recession and early recovery period
and roughly in line with previous recessions. Moreover, there is little evidence that migration varied based on

the magnitude of a state’s recent house
price decline or the employment status
of the household head. Given our findings and the significant amount of other

	 See, e.g., Sam Schulhofer-Wohl, 2010,

unemployment,” Economic Perspectives,
Federal Reserve Bank of Chicago, Vol. 35,
Third Quarter, pp. 82–96, forthcoming; and
Marcelo Veracierto, 2011, “Worker flows
and matching efficiency,” Federal Reserve
Bank of Chicago, mimeo, May. This research
describes the theoretical and empirical
underpinnings between job openings and
the unemployment rate and discusses their
implications for measuring the extent of
mismatch between workers and employers.

1

“Negative equity does not reduce homeowners’ mobility,” Federal Reserve Bank
of Minneapolis, working paper, No. 682,
December; and Ayşegül Şahin, Joseph Song,
Giorgio Topa, and Giovanni L. Violante,
2011, “Measuring mismatch in the U.S.
labor market,” Federal Reserve Bank of New
York, working paper, May. A contrasting view
is in Fernando Ferreira, Joseph Gyourko,
and Joseph Tracy, 2010, “Housing busts
and household mobility,” Journal of Urban
Economics, Vol. 68, No. 1, July, pp. 34–45.

	 See, e.g., Raven Molloy, Christopher L.

Smith, and Abigail Wozniak, 2011, “Internal
migration in the United States,” Finance
and Economics Discussion Series, Board of
Governors of the Federal Reserve System,
working paper, No. 2011-30, May.

	 However, see Daniel Aaronson, Scott Brave,

3 See Gadi Barlevy, 2011, “Evaluating the

role of labor market mismatch in rising

	 We do not know whether a sample attrition

6

is associated with a move, however.

	 Before 2004, some of the earlier SIPP panels

7

grouped smaller states together. Excluding
these states from the analysis does not
substantially change the results.

	 The aggregate annual state-to-state migration

8

rate is roughly three times the weighted
average of the four-month homeowner and
renter rates plotted in figure 1. The weights
are the shares of homeowners and renters.

4

2

and Shani Schechter, 2009, “How does labor
adjustment in this recession compare
with the past?,” Chicago Fed Letter, Federal
Reserve Bank of Chicago, No. 263, June.

current evidence, we conclude that there
is little empirical evidence that house
lock has been an important driver of the
recent high unemployment rate.

	 We do not use the 1989 SIPP because of

5

fairly significant differences in design
compared with those of other SIPP.

	 In this article, we use recessions and expan-

9

sions as defined by the National Bureau of
Economic Research.

	This may be related to a declining secular

10

trend in state-to-state migration among
homeowners and renters in the SIPP—a
phenomena described by Molloy, Smith,
and Wozniak (2011) using other data sets.