Economists have been puzzled about why the latest recession produced such a feeble recovery, but here’s one important new clue: The portion of Americans moving from place to place has fallen close to record lows, inhibiting people’s ability to go where the good jobs are or remake themselves in one place after flaming out in another.
Labor mobility, as it is known, has always contributed to the dynamism of the U.S. economy and, usually, to brisk recoveries following an economic downturn. When jobs dry up in one area, people normally migrate to places with more opportunity, which drew settlers to the West in the 1800s, rural citizens into cities in the 1900s, and, more recently, refugees from decaying Rust Belt cities to more vibrant areas in the South and West. This kind of rebalancing is essential in a free market, since wealth moves around and workers must too if they want to pursue it.
But Americans aren’t moving the way they used to. Census data analyzed by demographer William Frey of the Brookings Institution shows that the internal migration rate from 2012 to 2013 was just 11.7%, the second lowest reading since 1948; the lowest was 11.6%, in 2011.
Compare that with an average migration rate of 16.7% in the 1990s. In the 1980s, it was 17.9%, and in the 1950s it was 20.2%. So the portion of Americans moving around in 2013 was barely half what it was 50 years ago. At the same time, the recovery from the 2007-09 recession has been the weakest since World War II, with nearly 20 million people still unable to find a good job and many other adults giving up looking for work altogether.
There are a lot of reasons for the slowdown in mobility, not all of them related to the recession. The U.S. population is getting older, for instance, so young people going where the action is represent a smaller chunk of the population than they did when baby boomers were young adults eager to “follow your bliss,” as philosopher Joseph Campbell urged them to do.
But Americans are also increasingly stuck in place because of economic factors, including some that helped cause the recession. The housing bust, for example, led to double-digit drops in property values in many cities, preventing many homeowners from selling their homes and moving, unless they were willing to bear a big loss. The explosion of debt during the last 25 years has also left homeowners with less equity than in the past, another factor that makes it hard to cut your losses and move to someplace with more opportunity. Recent college graduates may not own homes, but many have onerous levels of student-loan debt, which limits their financial flexibility and may tie them to low-paying jobs that still seem better than the uncertainties a move would produce.
Americans may also be staying in place because they can’t identify a new city that seems much better than the old one. “In the past, it was regional,” says Frey, referring to earlier recessions that tended to hit one sector or region of the country -- such as manufacturing in the heartland -- more than others. “This time," Frey points out, "the housing market tanked at the same time the labor market tanked, and both were national patterns.”
The result has been a sharp drop in the rate of new-household formation, as more young people move back in with their parents, an arrangement neither generation prefers. Data analyzed by Frey, in fact, shows the migration rate among people age 25 to 34 fell from 27.2% in 1996 to 20.2% in 2013, a drop of 7 percentage points. Among those aged 55 and older, the migration rate dropped by less than 1 point during the same timeframe.
There are exceptions, of course. Blue-collar workers are flooding into the Dakotas and other energy-rich areas because of new shale-oil drilling techniques. And a few tech havens, such as Silicon Valley, Austin, Seattle and Portland, Ore., are the equivalent of booming frontier towns for people with a knack for coding and an entrepreneurial urge.
Economists also tend to think a stagnant economy during the last five years has created a lot of “pent-up demand” for new homes and other trappings of a middle-class lifestyle, which will materialize once companies start spending money again and jobs become a little easier to come by. And some young adults living with their parents are able to sock away savings that will aid their freedom to move later on. There are still places to seek your fortune, even if it’s smaller than it might have been in the past.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success . Follow him on Twitter: @rickjnewman .
- Personal Finance - Career & Education
- William Frey