by James T. Hammond
America's legendary ability to adjust to regional economic stresses is getting a bad case of arterial sclerosis.
It's long been a given across North America that if jobs became scarce in one region, people would sell their home, pack up the kids and the dog, and move hundreds or thousands of miles to a place where jobs were plentiful.
The Southeastern United States, and South Carolina, benefitted from a half-century of growth based upon that phenomenon. Workers followed employers from the Midwest and Northeast, as companies such as IBM, the Big Three automakers, and a variety of manufacturers moved plants to the South.
The Sunbelt became a beacon of growth, attracting families displaced by the declining steel industry in the Midwest, or a shrinking auto sector in Detroit. Workers moved to Austin, Texas, to fuel its technology sector's growth. Houston and Baton Rouge, La., attracted people to jobs in the oil and gas industry. South Carolina began attracting workers with new manufacturing giants such as BMW Manufacturing. That trend seems likely to continue with Boeing's decision to build passenger jets in North Charleston.
In 1986, almost 42% of job seekers relocated to take a new job, according to global outplacement consultant Challenger, Gray & Christmas Inc.
That trend became the lubricant for the amazing American job-creation machine. Employers could count on people relocating to find new jobs and fuel a region's growth.
But that human fluidity is solidifying, according to the most recent survey by Challenger Job Market Index, a quarterly survey among about 3,000 successful job seekers.
The availability of affordable housing throughout the country, and the seamless system of buying and selling those dwellings, historically made moving from coast to coast relatively easy.
But after three quarters of 2010, the percentage of unemployed managers and executives relocating for a new position fell to a record low. Depreciated home values contributed to eliminating relocation as an option for most job seekers.
Just 6.9% of job seekers who found employment in the third quarter relocated for the new position, the firm's research showed. That was down from a relocation rate of 13.4% in the same quarter a year ago, the survey showed.
The 6.9% figure in the quarter ending Sept. 30 was the lowest ever recorded by the firm, which began its tracking in 1986.
'Continued weakness in the housing market is undoubtedly the biggest factor suppressing relocation. Job seekers who own a home ' even if they are open to relocating for a new job ' are basically stuck where they are if they are unable or unwilling to sell their homes without incurring a significant loss,' said John A. Challenger, CEO of Challenger, Gray & Christmas.
'In a strong job market, where talent is difficult to find, employers might be more willing to help offset some of the financial loss associated with relocation. However, at this early stage of the recovery, companies are still in cost-containment mode,' he added.
Job seekers may also be opting to forego relocation due to increased confidence in their ability to find employment locally.
'Many areas have seen a slight improvement in the job market over the past year. While the gains have been small, for the most part, they may have been enough to lift job seekers from the sense of desperation that often compels people to relocate,' said Challenger.
An immobile work force could strangle job creation.
Challenger predicts that the immobility of the work force may mean that some employers will have to delay expansion plans, slowing the recovery.
Companies such as Boeing will hire many people who already live in South Carolina, but they also inevitably must import workers with special skills. Those workers, often making above-average salaries, fuel South Carolina's growth. They buy homes and traditionally contribute to a vibrant home construction industry that in turn has employed thousands.
But what if those high-wage workers cannot sell their homes in other parts of the country? They might forego the relocation, and crimp Boeing's ability to assemble the large and diverse work force necessary to be successful here.
The homeowners themselves contribute to the immobility. As home prices plummeted during the recession, homeowners clung to pre-recession ideas of their home's market value. Counties contribute to the illusion of value by continuing to carry homes at their pre-recession values on the tax books. And buyers come to the table with visions of fire-sale prices dancing in their heads.
Pretty soon, the entire system becomes set in cement, and no one can buy or sell.
Clearly, the system needs a reset. Appraisers, who in the past might have been too willing to set a value calculated to help a buyer get a loan, are now taking a tougher approach. They're marking down estimates to reflect realistic demand and values. Home owners seeking to sell are disappointed. But the realistic evaluations are a step in the right direction to get the system out of the ditch.
Local governments now need to swallow their pre-recession expectations and set realistic valuations on homes before levying taxes.
And buyers need to acknowledge that there is a floor to the slump in home prices. There are many great bargains at current values. It's time to move forward, make an offer and buy that house.
I'm not suggesting this is a simplistic answer to job-seeker immobility. Clearly other factors are at play as well. The evolution of the virtual office, in which an expert in a variety of fields can work remotely via the internet, has given many people the option of taking new jobs without relocating.
But it is nevertheless a worrisome trend when viewed in the context of America's traditional economic model. And the housing market desperately needs a wrenching readjustment that frees people presently tied to homes they haven't been able to sell for months or years.
When expectations adjust, home sales can begin to become unstuck.
Home ownership still represents real value for middle class families to build wealth. Stocks, the lion's share of most people's retirement nest eggs, can theoretically drop to zero value. But homes and their underlying real estate seldom sink that low. And an owner-occupied home that is paid for after 30 years represents real value in the cost of quality shelter.
James T. Hammond is Editor of GSA Business. Reach him at firstname.lastname@example.org.