U.S. Migration Falls Sharply, by Conor Dougherty, WSJ:

Migration around the U.S. slowed to a crawl last year, especially for this decade’s boom towns, as a weak housing market and job insecurity forced many Americans to stay put.

Demographers say the dropoff in migration, shown in Census data to be released Thursday, is among the sharpest since the Great Depression. It marks the end of what Brookings Institution demographer William Frey calls a “migration bubble.”

As asset values rose fairly steadily in the past decade, Americans young and old moved around the country in search of jobs or better weather. In many cases, people living in higher-cost housing markets such as San Francisco and New York cashed in their real-estate winnings and moved to outlying counties, or to states like Florida and Nevada, hoping to find a cheaper house and pocket the difference. Now, “people are hanging tight; they’re too scared to do anything,” said Mr. Frey.

The data, covering the one-year period until July 1, 2008, show this effect across U.S. counties and metropolitan areas — another sign of how this recession has spared few industries or regions.

Migration typically slows during recessions. But in past downturns, the slowdown has been more regional in scope, with workers fleeing weaker job markets for places where companies were still hiring. In the deep 1980s recession, for instance, laid-off auto workers fled the industrial Midwest for energy-rich states in the South with more plentiful jobs.

What’s unique this time is migration has slowed almost everywhere. The sharpest year-to-year changes were among what demographers call “domestic migrants,” people who moved within the U.S. That doesn’t count population changes that result from births, deaths or immigration.

Although I agree with the trend behavior described above, Dougherty is incorrect about the cyclicality of geographic mobility. In fact, geographic mobility is moderately countercyclical—that is, more people move during recessions than during booms (relative to trend). This may seem counter-intuitive but makes economic sense.

Geographic mobility is a means of reallocating resources, in this case labor, to more efficient uses. In the past, 70 percent of people who move indicated having moved for economic reasons and up to 50 percent of those moves occurred because of a job separation [Lansing and Morgan (1967); Bartel (1979)]. In particular, there is a significant positive relationship between unemployment and geographic mobility [Bartel (1979); Schlottmann and Herzog Jr. (1981, 1984)]. Thus, countercyclical mobility is consistent with reallocation of idle workers across space.

I assess the cyclicality of geographic mobility in a recent working paper. I the measure the rate of geographic mobility as one minus the share of persons living at the same address one year later reported by the U.S. Census Bureau. These data come from the March supplement to the Current Population Survey, so the 2007 data do not reflect much of the distress in mortgage markets—and any concomitant effects on mobility—that began later in 2007.

Removing the low-frequency trend is important because it represents structural changes—such as demographic changes or, say, innovations in mortgage finance—that are unassociated with the business cycle. I isolate the component of the time series that moves at business cycle frequency using an unobserved components model (see paper for details). The figure below plots the cyclical component of the mobility rate together with that of the unemployment rate for comparison.

The cyclical component of mobility tends to follow the unemployment rate, indicating that more people move during recessions than during booms. This is consistent with geographic mobility as a means for reallocating idle labor to more productive uses. The contemporaneous correlation of the cyclical component of the mobility rate with the unemployment rate is 0.50, indicating moderate countercyclicality. Also note that mobility is substantially less volatile over the business cycle than unemployment.

Of course, the problems in the housing market beginning in 2007, notably the dramatic decline in prices, will undoubtedly reduce geographic mobility during this recession. This will further slow recovery because unemployed persons cannot move to areas with more favorable labor markets as easily or quickly as before.

Recently several news pieces have made the claim that if the unemployment rate were calculated as it was during the Great Depression, the current rate would be close to double what it is, and creeping toward the formidable rates back in the 1930s.

The first problem with this statement is that there was no official unemployment rate until the 1940s. The ones we use today were reconstructed after the fact. As unemployment ballooned during the Great Depression a number of ad hoc attempts were made to calculate the rate, and the widely divergent results led private researchers and some state and local governments to experiment with various sampling methods….

The second problem with the statement is that it’s just not true. Although the BLS has refined their surveys and made questions more specific, conceptually the unemployment formulas have not changed, and the BLS’s own analysis of test data shows that the impacts of several sets of changes on the overall numbers are minor.

The Liscio analysis is consistent with my encounters with government statisticians. They are not idealogues who arbitrarily change formulas for political expedience. They are serious scientists and statisticians who are unwaveringly committed to obtaining the best measurements possible of very hard to measure things, things that have a very real impact on policy. It is at times a thankless job, made even more so when they are forced to refute nonsense claims about their methodology.

According to Barack Obama, 600 thousand Americans have lost their jobs since January. Actually, he’s wrong: something like 20 million Americans have lost their jobs since January. It’s just that most of them found new jobs. Probably the new jobs generally weren’t as good as the ones they lost. And almost certainly, more than 600 thousand of them were unable to find new jobs, because many of the new jobs created were filled by new entrants to the labor force or by people who were already unemployed when the year began.

Like almost everyone else I’ve ever heard, Senator Obama is making the mistake of using a net job loss figure with language that, if taken in its plain sense, clearly implies he is talking about gross job loss. And it seems to me that gross job loss is the appropriate concept: losing your job is a pretty serious bummer, even if you are able to find a new one after a few months.

knzn is right to highlight the distinction between gross and net employment outflows. Obama probably was talking about gross job losses. But the reason presidents talk about “the economy” “creating” so many jobs — never mind that an economy can’t create anything — is because that’s the proper way to interpret the statistic.

It is disingenuous to claim that 20 million workers lost jobs in 2008 without also talking about the 19.4 million persons who found new jobs. It would be equally disingenuous for Bush to claim he “created” 19.4 million jobs in 2008. That brings the discussion back to a net flow of 600 thousand.

Composition effects are large and important, as are the welfare losses from unemployment, but it was the 20 million number that struck me — as too small.

I discussed earlier that about 5 percent of the population (10 million persons) moves into and out of employment every month. Assuming outflows account for roughly half of that, we get 5 million persons a month. Over 8 months that comes to 40 million persons, twice knzn’s estimate.

To be fair, knzn’s figure is a rough estimate based on last year’s data and we all know the risk of projecting current trends into the future — just ask LTCM, Bear Stearns, Lehman Brothers, etc. And I suspect that I’m taking knzn’s forecast more seriously than he does but since I’ve already hauled out the sledgehammer, let’s find that fly.

knzn arrives at his estimate of 20 million lost jobs by extrapolating the “gross job losses” series from the BLS’s Business Employment Dynamics (BED). (This is a different source than the one the 600,000 figure comes from, but that doesn’t matter.) The BED reports quarterly data and with a considerable lag — no 2008 data are available yet — so knzn extends the quarterly rate from 2007 (about 7.4m per quarter) by assuming losses of 8m in the first 3 quarters of 2008 and rounding down.

There are better data available. Using Current Population Survey (CPS) data, I calculated the total number of persons who left employment each month through August 2008 (the latest available). These data, called gross flows, show that over 46.9 million Americans lost jobs in the first eight months of 2008! On the bright side, during that period over 46.4 million Americans were hired. The net change is -511,000, close to the -605,000 figure we get from cumulating the change in nonfarm payrolls from the establishment survey.

The first 3 columns of the table below show the monthly gross flow of persons into and out of employment as well as net change in employment (inflow — outflow). The right-most column shows the change in non-farm payrolls calculated from the CES.

So why does knzn’s estimate gross job losses differ so much from mine? The answer is time aggregation. knzn uses the BED, which has a quarterly frequency. I use CPS data, which has a monthly frequency. And the frequency of observation matters when measuring gross flows.

My research (link to come) shows that increasing the frequency of observation from monthly to weekly yields a 20-percent increase in measured transitions. Although I can’t extrapolate the weekly-to-monthly number into a monthly-to-quarterly effect, it is clear that the discrepancy would only intensify.

Indeed, it must. Below is a graph of quarterly employment outflows from 1990-2008. The quarterly CPS series is the sum of the monthly gross flows for that quarter. The BED understates the quarterly CPS job losses by more than a factor of 2.

Source: CPS and BED data.

In addition, the CPS data understate the true magnitude of gross job flows because they do not include direct job-to-job transitions. The CPS only records when a person moves from employment to nonemployment (unemployment or out of the labor force). Many workers transition directly from one job to another, without an intervening spell of unemployment. Fallick and Fleischman (2004) estimate that 2.6 percent of workers change employers each month (3.8m in 2008), more than twice as many as from employment to unemployment.

Whether the job-to-job changers should count as “job losers” is another question, but if Obama wants to talk about the total number of American workers who lost jobs in 2008, that number is at least 47 million.