Foreclosures Are Driving Up Unemployment

I’ve written several times about how lucky I feel that I can move. We’re going to take an absolute bath on selling our house (a 30% drop in value for a house bought 8 years ago). But at least we have enough money to get out of that house and move to a new job.

Many people in the states worst hit by the foreclosure crisis–FL, NV, AZ, CA–can’t do that. Which means they have to stick with crappy jobs because there’s no way they can move to where people are hiring.

Which is what Rortybomb explains this IMF paper shows.

This paper looks to analyze structural unemployment by regressing a “skills-mismatch index” (SMI), which quantifies mismatches on education level. as well as regressing foreclosure rates on unemployment rates.They find that structural unemployment is 1%-1.75%, with skills being 0.5%. That means housing hurdles run from 0.5% to 1.25% of unemployment.   So that means the large majority of structural unemployment is housing related.

This paper shows that a large majority of structural unemployment is the result of underwater mortgages and foreclosures. In addition, when foreclosures are added into the regression alongside [skills-mismatch index], SMI loses some of  its value, and when a cross term is added skills loses a bit more. Right now, the story is one of foreclosures.So groups that fight foreclosures, say what many over-worked and under-paid community organizers do now, are groups that fight to reduce structural unemployment for everyone. Same with those trying to get cramdown and right-to-rent and better short sales. Which is a worthwhile thing to be doing.

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