Structural Unemployment Myths: Construction, Moving, Mancessions.

Paul Krugman and Larry Mishel discuss the incredibly weak arguments for structural unemployment, based off this depressing interview with the Fed’s Charles Plosser:

Mr. Plosser’s answer is unequivocal: This mess was caused by over-investment in housing, and bringing down unemployment will be a gradual process. “You can’t change the carpenter into a nurse easily, and you can’t change the mortgage broker into a computer expert in a manufacturing plant very easily. Eventually that stuff will sort itself out. People will be retrained and they’ll find jobs in other industries. But monetary policy can’t retrain people. Monetary policy can’t fix those problems.”

Ugh.   As we’ve covered before, unemployment has roughly doubled across all occupations, industries, and states. But the popular conception of the jobs crisis has lead to some reall pernicious myths.  The first, and it is reflected in that quote, is that this is mostly a crisis about construction.


Scott Sumner has taken apart this myth by looking at the rate of residential construction unemployment and finding that “[a]lmost 40% of the job loss had occurred by April 2008, yet the national unemployment rate remained relatively low.”   The real jump in unemployment took place across all industries and occupations throughout the rest of that year and 2009.

Remember conceptually this was a credit bubble that had a major outlet in a housing market. The two important things to remember here are (1) A huge number of the gambling on housing prices was done through refinancing, taking junior liens out against underlying collateral, and other financial shenanigans and (2) the bubble was worse in places where the supply of housing was constrained. Both of these allow for higher housing prices without requiring any additional construction. There was a large number of housing starts but that isn’t reflective of the entirety of what was going on with the housing market.

If you look at something like the paper Subprime Mortgages, Foreclosures, and Urban Neighborhoods by Kristopher S. Gerardi and Paul S. Willen you can see a housing bubble that happened by people shuffling around existing properties, or as they found: “The evidence from Massachusetts suggests that subprime lending did not, as is commonly believed, lead to a substantial increase in homeownership by minorities, but instead generated turnover in properties owned by minority residents.” Construction is not the entirety of this story.


I haven’t blogged this one yet, but another myth is that there’s been a drastic reduction in mobility from this economic crisis. This is the idea that underwater homeowners can’t move.  It’s actually the opposite now – underwater homeowners appear more likely to move.  Ryan Avent caught this paper by Sam Schulhofer-Wohl, Negative Equity Does Not Reduce Homeowners’ Mobility, which finds:

Some commentators have argued that the housing crisis may harm labor markets because homeowners who owe more than their homes are worth are less likely to move to places that have productive job opportunities. I show that, in the available data, negative equity does not make homeowners less mobile. In fact, homeowners who have negative equity are slightly more likely to move than homeowners who have positive equity….

If, instead, people with negative equity are more likely to leave a house vacant (perhaps due to foreclosure) or rent it out (perhaps because they prefer to hold the property in hopes it will appreciate), then FGT will systematically drop negative-equity moves from the sample and will mistakenly conclude that negative-equity homeowners move less than they actually do. In this paper, I reanalyze FGT’s data, but I recode cases (3) and (4) | renters and vacancies | as moves, since the homeowners did indeed move in these cases. I a nd that with this change in coding, negative-equity homeowners are more rather than less likely to move.

Negative equity homeowners are more likely to move, not less likely to move. This will be the result of renting out an underwater house and living somewhere else or simply leaving the property, perhaps as a result of a foreclosure. The same author, a researcher at the Minneapolis Fed, found that the drop interstate mobility (already a very high value) was also the result of a data miscoding. There’s no empirical reason to believe that a drop in mobility is a major cause of unemployment.


My other favorite pernicious myth of this recession is the story of the Mancession. This hit the high moment with Hannah Rosin’s article The End of Men in The Atlantic. This is the idea is that male employment has suffered in this recession, and the workforce has been overtaken by women because of the possibility that “postindustrial society is simply better suited to women.” How are women doing in this recession?

There are a lot of ways to go about measuring this, but from peak employed numbers Men are down ~4.3 million jobs, women ~1.5 million jobs.   It’s awkward to announce the permanent hegemony of the matriarchy seizing the commanding heights of the economy by having women lose over a million and a half jobs in a short period of time.   If we removed the “men” line above we’d be sitting around talking about the Shecession or whatever, as women are suffering in this recession, but since men have lost more jobs we look at a tree instead of the forest.  Even though the real story is that this is an equal opportunity job crisis all around.

As a series on New Deal 2.0 about women and the recession pointed out, the story is far more complicated than these aggregate numbers. But sadly this framing makes sense.   If someone ran into the room, punched me in the head, and then punched you in the head and kicked you in the leg, I’d declare myself the winner.  I didn’t actually win anything – I got punched in the head! But you got punched and kicked, which means you’re a loser and I’m awesome.   It’s the same level of sophistication we use for gender and the jobs crisis.

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12 Responses to Structural Unemployment Myths: Construction, Moving, Mancessions.

  1. chris says:

    Even though the real story is that this is an equal opportunity job crisis all around.

    It’s not, though. Men had about 25% more jobs than women before the recession, but lost over twice as many (nearly three times as many) during it. There is a real phenomenon there, even if it isn’t *exclusively* about men. The recession has hurt both, but it hasn’t hurt them equally relative to pre-recession relative levels of employment.

  2. chris says:

    Or to put it shorter, P(lost job|man employed in 2008) >> P(lost job|woman employed in 2008), which is not what equal opportunity looks like.

  3. Mike says:


    Sure. But people are spinning it as if there weren’t any women who lost jobs, or that this moment secures the dominance of women over the labor force, when really women have lost a ton of jobs, and have gotten much worse on issues related to poverty metrics, etc. If men had the same job experience as women in this recession, it would still be a major jobs and unemployment crisis.

  4. Mark says:

    Spin aside, why have men disproportionately lost jobs compared to women? I would think an answer to that question would provide a useful input to the discussion. By my back-of the envelope calculation, the odds ratio of Chris’ two conditional probabilities is about 2 to 1.

  5. Jay says:

    “unemployment has roughly doubled across all occupations, industries”

    Yes, because we all know NAICS 23 includes jobs such as the manufacturing, wholesale and retail trade of construction materials. NAICS 23 also counts real estate brokers, mortgage loan officers, architects, accountants and lawyers the now defunct construction companies used to hire.

    • David Wiczer says:

      On this topic. Mike’s analysis is wrong for two reasons:
      1) Industry-level stuff is a stupid way to analyze it. Sure there may have been industry-level demand shocks, but long-run unemployment happens because people have to leave their occupation, and are tied to that human capital.
      2) Broad categories miss a lot of the nuance.

      The thing that you’ve never touched on is the direct evidence of structural change. In the last year 45% of unemployed people found work in another occupation. Usually that figure is 30%. Also, you can look at direct measures of industry-level productivity and see that the variance went up and has continued to be elevated: that seems like structural change to me.
      This doesn’t mean there’s not also some aggregate demand something going on, but you can’t entirely ignore that there’s some redistribution going on.

      • Mike says:


        Occupation-level unemployment/underemployment is up across the board, roughly doubling in categories. If there’s structural changes going on, where are the price movements?

      • David Wiczer says:

        Mike, good call! That’s the weird thing. Wages aren’t moving nearly as much as sizes. It’s odd, I don’t know, I’m flumuxed

  6. Fred says:

    Could anyone explain to a layman why the proportion of raised unemployment is the interesting number and not the absolute numbers. Isn’t an industry going from 7% to 14% taking a greater hit than an industry going from 3% to 6% unemployment?

  7. chris says:

    How can an unemployed person be said to be in any particular industry in the first place? Are they characterized based on work experience or skills? If there were a real sectoral shift you’d expect to see people laid off from one industry getting hired into a *different* industry, wouldn’t you? (I guess the point of this post is that that isn’t happening, or not at unusual rates: could that be measured directly?)

  8. pebird says:

    I imagine relative wage rates might have something to do with male unemployment being higher.

  9. Pingback: Keynes v. Hayek Redux « Chasing Fat Tails

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