South By North Strategies, Ltd.

Jack Temple of Policy Shop mulls the “spatial mismatch” theory of unemployment and finds it wanting.

While the spatial mismatch theory was actually introduced in the 1960s to explain the role that residential segregation plays in fueling unemployment for black households, it’s gotten renewed attention as of late given the role that the housing downturn has played in the recession. The story goes like this: 1) Some 16 million households have negative equity in their homes, 2) these households are likely clustered in areas that are suffering from a more general economic downturn, 3) having an underwater mortgage makes it difficult for people to move to areas with stronger job growth, and 4) mismatch ensues.
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Sounds logical — but, according to a report released on Wednesday from the Federal Reserve Bank of Boston, the spatial mismatch theory just doesn’t shake out. The Fed report modeled the role that negative equity itself plays in household migration decisions and then estimated the impact of improved mobility for underwater households on the national unemployment rate.
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The results are pretty clear. Overall, negative equity reduced inter-state relocation (the type of relocation most like to occur for employment purposes) by a grand total of 0.05 percent from 2006 to 2009…. If this reduction hadn’t occured, and all of these people not only moved but also found a job in their new location, it would have yielded an unemployment rate in 2009 of 9.0 percent as opposed to 9.3 percent.