The tanking housing market poisons the broader economy in more ways than one. Louis Uchitelle at the NY Times makes the excellent point that the distressed housing market distorts the labour market by hampering worker mobility. When it’s difficult to sell on’e home for a psychologically acceptable price, workers are more reluctant to take that job in a new city. Uchitelle continues:
The rapid decline in housing prices is distorting the normal workings of the American labour market. Mobility opens up job opportunities, allowing workers to go where they are most needed. When housing is not an obstacle, more than five million men and women, nearly 4 per cent of the nation’s work force, move annually from one place to another — to a new job after a layoff, or to higher-paying work, or to the next rung in a career, often the goal of a corporate transfer. …
Now that mobility is increasingly restricted. Unable to sell their homes easily and move on, tens of thousands of people… are making the labour force less flexible just as a weakening economy puts pressure on workers to move to wherever companies are still hiring.
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