Inability of Unemployed to Relocate One of Biggest Obstacles to Economic Recovery

After rising to its highest level in nearly two years during the first half of 2011, the percentage of job seekers relocating for new positions dropped to a near record low to finish out the year. The latest data provides further evidence that one of the biggest obstacles to economic recovery could be the lack of mobility among the nation’s unemployed.

Over the last two quarters of 2011, an average of just 7.5 percent of job seekers finding employment relocated for their new positions. That is down nearly two points from an average relocation rate of 9.4 percent in the first two quarters of the year. It was slightly lower than the same period in 2010, when 7.7 percent of job seekers relocated for new positions.

The relocation data released Thursday by global outplacement and executive coaching consultancy Challenger, Gray & Christmas, Inc. is based on a quarterly survey of approximately 3,000 job seekers, many of whom are managers and executives, from a wide range of industries and occupations nationwide.

“It appeared that relocation was beginning to bounce back after plunging in the wake of the housing market collapse and the deep recession that followed. However, the latest numbers indicate that picking up stakes remains a last resort for the majority of job seekers, many of whom are unwilling to take a loss on the sale of a home for a position that may or may not last,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

The percentage of job seekers relocating plunged in the wake of the housing collapse. Since the fourth quarter of 2009, the quarterly relocation rate has averaged just 7.9 percent. In contrast, an average of 15.7 percent of job seekers relocated for new positions each quarter in the pre-recession period from 2005 through 2007. Even during the onset and throughout most of the recession, from 2008 through the third quarter of 2009, the relocation rate averaged 13.2 percent.

“The largest factor behind the low relocation figures is, of course, the still-struggling housing market, which has shown no signs of improvement outside of a handful of markets. Home prices are still falling and millions of homes are approaching foreclosure, which will saturate the market with even more low-priced inventory. Unfortunately, once home values begin to rebound, it could take years before homeowners are back above water,” said Challenger.

According to the latest S&P/Case-Shiller Home Price Index, which measures home prices in 20 major U.S. cities, October prices declined by 1.1 percent from September and were down 3.4 percent from October 2010. It was the 13th consecutive year-over-year decline recorded by the index.

“Most of the relief programs being proposed are designed to target those nearing foreclosure. However, there are millions of homeowners that have been able to avoid falling behind on their mortgages, but whose home value remains underwater. These families are unable to get help getting out from under their mortgages, so they are unable to move for new job opportunities. This is unfortunate, because many areas are seeing significant improvements in their job markets,” said Challenger.

The latest data from the Bureau of Labor Statistics show that in December 25 states saw nonfarm payroll employment increase, with the biggest gains coming in Texas, Indiana, and California. As of November, 61 cities had unemployment rates below 6.0 percent. That is up from 42 cities that had sub-6.0 unemployment rates in May.

“The labor markets are not tight enough yet to compel the vast majority of employers to cover the cost of relocation for new hires. Even if some are willing to cover moving costs, most will not cover the shortfall homeowners would incur by selling an underwater home. So, for now, many people are stuck. At the moment, this is not having a major impact on the recovery. Eventually, as the economy continues to improve, employers will exhaust the local talent pool. If job seekers are still unable or unwilling to move at that point, it is likely to stall companies’ expansion plans and ultimately stall economic growth,” said Challenger.