Manufacturing Decline, Housing Booms, and Non-Employment

We assess the extent to which manufacturing decline and housing booms contributed to changes in U.S. non-employment during the 2000s. Using a local labor market design, we estimate that manufacturing decline significantly increased non-employment during 2000-2007, while local housing booms decreased non-employment by roughly the same magnitude. The effects of manufacturing decline persist through 2011, but we find no persistent non-employment effects of local housing booms, most plausibly because housing booms were associated with subsequent busts of similar magnitude. We also find that housing booms significantly reduce the likelihood that displaced manufacturing workers remain non-employed, suggesting that housing booms "mask" non-employment growth that would have otherwise occurred earlier in the absence of the booms. Applying our estimates to the national labor market, we find that housing booms reduced non-employment growth by roughly 30 percent during 2000-2007 and that roughly 40 percent of the aggregate increase in non-employment during 2000-2011 can be attributed to manufacturing decline. Collectively, our results suggest that much of the non-employment growth during the 2000s can be attributed to manufacturing decline and these effects would have appeared in aggregate statistics earlier had it not been for the large, temporary increases in housing demand.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

[1]  H. Herzog.  Who Benefits from State and Local Economic Development Policies , 1992 .

[2]  James C. Cox,et al.  Unemployment Insurance and Job Search , 1990 .

[3]  R. Moffitt.  The U.S. Employment-Population Reversal in the 2000s: Facts and Explanations , 2012 .

[4]  Thomas Philippon,et al.  Household Leverage and the Recession , 2011, Social Science Research Network.

[5]  D. Ellwood,et al.  An Empirical Reconciliation of Micro and Grouped Estimates of the Demand for Housing , 1979 .

[6]  Todd Sinai,et al.  House Price Moments in Boom-Bust Cycles , 2012 .

[7]  Amir Sufi,et al.  House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis , 2009 .

[8]  Amir Sufi,et al.  What Explains High Unemployment? The Aggregate Demand Channel , 2012 .

[9]  S. Davis,et al.  Measuring Economic Policy Uncertainty , 2013 .

[10]  Fernando V. Ferreira,et al.  Anatomy of the Beginning of the Housing Boom: U.S. Neighborhoods and Metropolitan Areas, 1993-2009 , 2011 .

[11]  L. Taylor.  Consumer Demand in the United States: Prices, Income, and Consumption Behavior , 2009 .

[12]  A. Roy.  Some thoughts on the distribution of earnings , 1951 .

[13]  Jesse Rothstein.  Unemployment Insurance and Job Search in the Great Recession , 2011 .

[14]  Thomas Philippon,et al.  Household Leverage and the Recession , 2011, SSRN Electronic Journal.

[15]  Erzo F. P. Luttmer.  Neighbors as Negatives: Relative Earnings and Well-Being , 2004 .

[16]  Communities.  House Price Index , 2013 .

[17]  S. Ruggles.  Integrated Public Use Microdata Series , 2021, Encyclopedia of Gerontology and Population Aging.

[18]  David H. Autor,et al.  The Rise in the Disability Rolls and the Decline in Unemployment , 2003 .

[19]  David Dorn,et al.  The China Syndrome: Local Labor Market Effects of Import Competition in the United States , 2012 .

[20]  Albert Saiz,et al.  The Geographic Determinants of Housing Supply , 2010 .

[21]  Giorgio Topa,et al.  Mismatch Unemployment , 2012 .

[22]  Matthew J. Notowidigdo.  The Incidence of Local Labor Demand Shocks , 2011, Journal of Labor Economics.

[23]  C. Mayer.  Housing Bubbles: A Survey , 2011 .

[24]  H. Holzer,et al.  Industrial Shifts, Skills Levels, and the Labor Market for White and Black Males , 1991 .

[25]  Lawrence F. Katz,et al.  Regional Evolutions , 2007 .

[26]  C. Mulligan.  The Redistribution Recession: How Labor Market Distortions Contracted the Economy , 2012 .

[27]  David Card,et al.  Tipping and the Dynamics of Segregation , 2007 .