We all know the job market continues to be lousy more than two years after the recession officially ended. There's a variety of reasons for this.
The problem has been exacerbated by the low mobility rate -- that is, the number of people who are moving every year. Housing certainly plays a role in that, as selling a home has become increasingly difficult. It's logical to assume that this makes it more difficult to move for a new job, as well. Whether sitting on an underwater mortgage or just trying to sell a house free and clear in this market is a real problem. The argument (and one I happen to agree with) is that modifying mortgages or encouraging banks to approve short sales will help address that problem by making it easier for people to move to where the jobs are.
Ahh ... but see that's not the real problem, according to UCLA researchers Kyle Herkenh and Lee Ohanian. (A PDF of their paper is available here.) They argue that the problem is mortgage modifications make it more attractive for people not to move. Modifications encourage homeowners to stay on unemployment and not seek new employment elsewhere, they say.
Wow. I'm certainly no economist, but it's not making a lot of sense to me. But it does this remind me of Rick Santelli's rant on how those poor traders and bankers who destroyed the economy were going to have to give up their hard-earned money by supporting "losers" that couldn't pay their mortgages.
Got it -- all we need to do is kick people out of their homes to get the economy back going again.