Few in U.S. move for new jobs, fueling fear the economy might get stuck, too

By Michael A. Fletcher
Washington Post Staff Writer
Friday, July 30, 2010; A01

PALM COAST, FLA. -- The recession is claiming yet another victim: Americans' near-constitutional right to pick up and move to a better job.

Labor mobility has nearly ground to a halt in the past two years, and policymakers are increasingly worried that the slowdown is not just a symptom of the nation's economic struggles but also a barrier to overcoming them.

With many people locked in homes by underwater mortgages, only 1.6 percent of Americans moved between states in a one-year period that ended in March 2009 -- a labor stagnation not seen in half a century. Though household mobility has gradually declined for more than two decades, the recent sharp downturn has caused economists to worry that it could harm the already struggling recovery.

"In the past, people tended to move to where the jobs are," said Assistant Treasury Secretary Alan B. Krueger, who oversees economic policy for the department. "Now it is necessary to have more of a strategy to move the jobs -- and create new jobs -- in areas where the people are."

The labor migration rate is down sharply since the start of the economic downturn in 2007 and is just half the rate of a decade earlier, according to William H. Frey, a Brookings Institution demographer who has analyzed Internal Revenue Service and census data.

"Overall, interstate migration has reached its lowest point since World War II," Frey said.

In Palm Coast, civil engineer James Tiffany took a job in 2006 and quickly bought a home to capitalize on the boom that transformed this once sleepy retirement community into one of the nation's fastest-growing cities.

(Economic growth slows to 2.4 percent in second quarter)

But as boom turned to bust, Tiffany was thrown out of work, and the city became known less for its explosive growth than its alarming level of joblessness. The area's unemployment rate is 15.4 percent, the nation's 11th highest, and many of the jobs that once powered the local economy are probably gone for good.

That has left a large share of the area's jobless much like Tiffany: with skills that are no longer in demand here but saddled with mortgages that prevent them from leaving. "I'm sort of in a pickle," Tiffany said with an amused smile before resuming his job search at a computer terminal in the city's One-Stop Employment Center. "I'm stuck in a home that I can't get out of if I wanted to."

Mobility a sign of strength

Tiffany's predicament is becoming increasingly common as more jobless Americans remain out of work for ever longer periods of time, prompting concern that the nation's long-term unemployment problem could persist well into the future. Analysts have long viewed a mobile workforce as a signature strength of the American economy. The willingness of U.S. workers to move to opportunity has helped the country recover quickly from past economic shocks. It also has helped keep the unemployment rate relatively low, at least in comparison with Europe, which has much less labor mobility. Dramatic examples include the great migration of American blacks from the South to the industrial North over several decades of the past century, the later move of workers from the Rust Belt to the Sun Belt and the rush of workers to the Alaska oil pipeline in the 1970s.

Now the United States and Europe have similar unemployment rates, and economists worry that decreasing labor mobility is a growing factor in keeping the nation mired in its worst employment situation since the Great Depression. The last time U.S. unemployment rates approached double digits, in the early 1980s, most of the layoffs were temporary. But now the vast majority of the 8 million jobs lost since the start of the recession in 2007 appear permanent. Nearly half of the nation's 14.6 million jobless workers have been unemployed for longer than six months.

Many economists believe that a significant number of workers will have to move before the employment picture substantially improves.

But workers have proved unwilling -- or unable -- to relocate. The biggest factor seems to be the large number of unemployed homeowners who have little or no home equity. Between 2006 and 2009, the number of renters who moved out of state decreased by 13.6 percent, according to census statistics, while interstate migration among homeowners has plummeted by 25.5 percent.

That problem is compounded by the sheer scope of the unemployment problem, which has left few areas in the country untouched. Many Sun Belt cities, long magnets for job seekers from economically depressed areas, have joined long-suffering Rust Belt areas as places with the highest unemployment rates. The Las Vegas metropolitan area has a 14.5 percent unemployment rate, higher than the rate in Flint, Mich. In Riverside, Calif., the jobless rate is 14.4 percent, higher than the rate in the Detroit area. And in Charlotte, unemployment is 10.9 percent, the same as Lima, Ohio.

"There are not a lot of opportunities to move. That is a huge factor in terms of less mobility," said Fernando Ferreira, a professor at the University of Pennsylvania's Wharton School who has written about the effect of the housing meltdown on mobility. "And the lack of mobility definitely hurts the efficiency of the labor market."

Mortgages limit options

Only a few regions in the country have not experienced large spikes in joblessness during the recession. Among them are the Dakotas, Iowa and parts of Texas, where there was no housing bubble to burst.

Until recently, the economy in Palm Coast was built largely on breakneck housing growth, which helped double the population to about 100,000 over the past decade and drew people such as the 32-year-old Tiffany to town. He and his wife, a physical therapist, moved here from New Smyrna Beach, Fla., about 50 miles away.

When Tiffany arrived, the company he worked for had a backlog of jobs that made his civil engineering degree seem like a passport to lifetime employment. His days were filled designing drainage ponds and utility systems for the developments that were sprouting all over the city, which is the hub of Flagler County. Now the company has shed all but a handful of its workers, leaving just a skeleton staff and leaving Tiffany in a desperate search for a job.

"I'm looking around," he said, adding that few places are even accepting applications. "But I can't even give a résumé away."

And Tiffany can't move, because of the big financial hit that would involve. He purchased his house for $230,000. Now, he says, he could probably sell it for $175,000. "If I sold my home, I would be out more than $50,000," Tiffany said. "I can't do that."

The slowdown caught local officials by surprise. The huge county courthouse in Palm Coast is largely vacant. Next door, the new county office building was also built for growth that suddenly ended, and the school system occupies much of the extra space.

Meanwhile, leaders are thinking hard about how best to revive the economy, something that was not necessary for a long time as the city's miles of hiking trails and easy access to the beach seemed to sell itself. "We have to identify assets, and that will help us brand ourselves as unique," said County Commission member Milissa Holland.

When magazine marketing and fulfillment company Palm Coast Data threatened to leave two years ago, Palm Coast officials vacated their city hall and leased it to the company to keep its more than 1,000 jobs in town. The city is expanding its open-access fiber-optic network to help lure business. Palm Coast also recently landed Galtronics Telemetry, an Israel-based maker of advanced antennas that has a design and marketing center in Palm Coast.

Officials are proud of those moves, but they know the new jobs are unlikely to be a good match for the construction workers, real estate agents and mortgage brokers who make up the largest share of Palm Coast's unemployed.

"You can bring in all the electronics jobs you want," said Mayor Jon Netts. "But the guy who is skilled as a framer, or a roofer or drywall installer, that is not going to help him. "

© 2010 The Washington Post Company