Past periods of unemployment in America have often been resolved by a program of matching up people to jobs, but this time around, we wonder if there is something more intrinsic or structural that has created a 10% (some say higher) national unemployment rate. It may no longer be a case of simply encouraging workers without jobs to move to locations where there are jobs.
Consider this. Geographical areas which experienced the all out housing booms of the 1990’s now find themselves mired in a sea of underwater homeowners. A certain percentage of these underwater homeowners go on to become foreclosures. A wave of foreclosures creates a budget gap at the state level because property taxes which were expected to be forthcoming never materialize. So now states afflicted with this chain of events, at least the fiscally responsible ones, are forced to cut their budgets to make up the shortfall.
A state with a contracting budget due to less incoming tax money normally does not bode well for employment possibilities. You’ve heard of stimulus? This is more like the anti-stimulus. And where in the past the prospect of an underwater mortgage (owner owes more on the property than it’s worth) was practically nonexistent, today it seems too many are mired in the midst of one to shrug it off as coincidence. They don’t want to sell their property at a loss, and certainly don’t want to go the foreclosure route, which leaves them chained to an asset of diminishing value, though still paying the same price to own it.
Even if there were a plethora of jobs to be found by relocating to a place where the local economy is booming, people are stuck where they are. Moving somewhere else, and accepting a foreclosure in the process, is too much like starting over – actually IS starting over but we’re talking about a middle-aged family with kids now. Starting over in your 40’s is a different psychological step than in your 20’s. This is the time in life when things are supposed to be cooking along: good job, home ownership, kids getting ready for college. For too many, the American Dream has disintegrated into the American Nightmare.
Obama and Bernanke fiddle. America burns.
The American Monetary Association Team
Flickr / thivierr