Housing and Unemployment: The More Realistic Story

Story Stream
recent articles

Though it made the front page of USA Today last week, a headline about individual U.S. mobility drew little comment from the economic commentariat. This is odd given the economic peril it signals, particularly in light of the high rate of unemployment in the United States.

According to the USA Today account of Census Bureau statistics, only 11.6% of Americans changed their addresses from 2010 to 2011, "the lowest rate since the Census Bureau began collecting the statistics in 1948." The number is striking because as anecdotal and empirical evidence reveals, throughout the whole of U.S. history Americans have always been on the move.

For evidence we need only reference the writings of libertarian philosopher Alexis de Tocqueville. Traveling in the States in the 1830s, he described the constant flow of new arrivals in search of personal and economic freedom as "restless in the midst of abundance." And as The Hypomanic Edge author John D. Gartner notes further, Tocqueville observed that Americans were quite nomadic then, much as we are today. Indeed, according to Gartner, the "average American changes residences every five years--more than the inhabitants of any other nation."

One could argue that there are many reasons for a uniquely American (Australians, similarly refugees from the rest of the world, certainly exhibit similar traits) wanderlust, but in a nation known the world over for the ability of its inhabitants to create staggering amounts of wealth, it should be said that American mobility is rooted in a desire among many of us to seek out the best economic opportunities irrespective of locale.

And as a nation very much on the go, is it any wonder that even now, in our downcast state authored by government barriers meant to depress our natural entrepreneurial ways, that the U.S. remains the place where the ambitious the world over seek to live in if given the chance? America is a melting pot of ethnicities, most of them dogged in their constant pursuit of wealth, and if allowed, millions around the world would like to join us in that pursuit.

Of course the problem now is that Americans aren't very mobile. Some would perhaps correctly point to a difficult market for employment that makes migration a more perilous endeavor, but not spoken of enough is the government's role in tethering Americans to one location.

Here it should be said that incentives matter. Just as the desire to achieve, or live better, or to help one's dependants drives many individuals to seek fortune, within governments "success" is a function of pulling in as much in the way of tax revenues as possible. Though successful businesses get that way by virtue of doing as much as possible with as few people as possible (reducing costs without reducing output - the definition of productivity), governments succeed by doing as little as possible with as many labor inputs as taxpayers will allow; success in government a function of the growth in the size, scope and cost of it.

In that case, is it any wonder that promotion of home ownership is such a popular governmental initiative? For one, the politics work because housing quite incorrectly has been elevated as a false economic God. But more important for governments constantly in search of revenues is the basic truth that homeowners are on the margin immobile, and immobile individuals are easier to tax.

Looked at in terms of today, policies in favor of a weak dollar that began with the Bush administration authored, much as they did in the 1970s, a rush into an asset class that tends to do well when currencies are cheapened. To put it very plainly, housing is the ultimate middle class hedge.

Even better for those desperate to protect their wealth from government confiscation of it through dollar devaluation, all manner of programs largely paid for by those devilish "one percenters" in the form of Fannie Mae, Freddie Mac and the FHA (to name but three) made it even easier for Americans to jump into one of the few assets that performs during inflationary periods. That they could live in their inflation hedges perhaps softened the blow of more difficult economic times invariably wrought by inflation.

But with housing having moderated, and even corrected substantially in some places, Americans are now stuck holding assets not so much in decline as much as they're not very saleable. With housing abundant as a result of prior monetary and fiscal mistakes, the ability for individuals to move on is greatly reduced.

Americans have historically moved with great gusto given their constant search for better job opportunities, but with so many in possession of homes they can't unload, mobility is subdued and with that, unemployment remains higher than it otherwise would be. Governments created a trap from which many can't escape, and because they can't, their access to job opportunities is lessened.

Though subprime's role in the housing debacle is overdone, the irony there is that prior to the recessionary Bush-era rush to housing, many subprime types did as they should; as in they rented. Politicians of course worship at the altar of ownership, but the beauty of renting living space for those without substantial means was that leases were the only, and very surmountable, barrier to mobility.

That's not the case today, however. Having authored an economic crackup rooted in housing, our federal minders continue to seek avenues through accession of the money of others to "keep Americans in their homes."

All of us would be wise to be skeptical. Immobility is great for governments, but it's not good for individuals. Though we may fear reality as it applies to the true housing market, a dose of reality is what's needed now so that housing bottoms and inhabitants vacate these proverbial chains around their necks in search of the best opportunities near and far.


John Tamny is editor of RealClearMarkets, Political Economy editor at Forbes, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He's the author of Who Needs the Fed?: What Taylor Swift, Uber and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank (Encounter Books, 2016), along with Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You About Economics (Regnery, 2015). 

Show commentsHide Comments

Related Articles