This study explores the hypothesis that high home-ownership damages the labor market. We show that rises in the home-ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state. The elasticity exceeds unity: a doubling of the rate of home-ownership in a U.S. state is followed in the long-run by more than a doubling of the later unemployment rate. What mechanisms might explain this? We provide evidence that rises in home-ownership are associated with three potential concerns: (i) lower levels of labor mobility, (ii) greater commuting times, and (iii) fewer new businesses. Our argument is not that owners are disproportionately unemployed, nor that the observed patterns are due to Keynesian effects. The evidence implies, instead, that the housing market may produce negative 'externalities' upon the labor market. The time lags are long. That gradualness may explain why these patterns remain little-known.
natural rate of unemployment labor market housing market structural business cycles mobility