In August, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota described the elevated unemployment levels as a structural problem. (See our post on his speech here). Kocherlakota noted the breakdown in the relationship between the unemployment rate and the job openings rate, two data series which are typically closely related. Historically, when job openings increase, the unemployment rate decreases. However in this recession and recovery, the decline in the unemployment rate has lagged behind improvement in the job openings rate.
Kocherlakota noted the breakdown was a sign that companies have been unable to find appropriate people to fill the openings. Typically, workers lack the skills required to fill the openings, however, today many qualified workers may be unable to relocate to potential employment opportunities because of the housing market. Due to declines in home values, workers could be underwater on their current mortgage or have completed a mortgage modification, many of which bar the homeowner from selling the house for a specific period of time.
Data released by Challenger, Gray & Christmas highlight the steep fall in the share of job seekers who are relocating for employment. From 2001 to 2009, relocation rates for job seekers has ranged in the teens. However, the relocation rate for 2010 was 7.3%, almost half of 2009's rate of 13.3%.
Housing conditions are having a direct impact on the labor market, making the recovery increasingly challenging for businesses, those seeking work, and policy makers.