Manufacturing Decline, Housing Booms, and Non-Employment

We exploit cross-city variation in manufacturing decline and housing market changes during the 2000s, and jointly estimate their effects on non-employment. Both forces strongly affected nonemployment between 2000 and 2007, with the increase from manufacturing decline almost exactly offset by reductions attributable to housing. We show that this offsetting occurred both in the aggregate and at the individual level. Moreover, we show that the housing bust undid the effects of the preceding housing boom, such that over the entire 2000s housing explains little of the aggregate non-employment increase, while manufacturing explains roughly 40 percent.(J21, E24, E32, R23) 1E-mail: [email protected]; [email protected]; [email protected]. We thank John Bound, Tom Davidoff, Matt Gentzkow, Ed Glaeser, and Erzo Luttmer for their detailed feedback, and we thank Hank Farber and Tom Lemieux for their comments as discussants. Additionally, we thank seminar participants at the Columbia, Duke, Harvard, Maryland, Northwestern, Princeton, Tulane, University of British Columbia, University of Chicago, University of Illinois at Chicago, the AEA, Einaudi Institute, the NBER Summer Institute (Macro Perspectives), and the Atlanta, Chicago, Cleveland, and New York Federal Reserves for helpful comments. We are grateful to David Toniatti and Dan Zangri for excellent research assistance. We gratefully acknowledge the Initiative on Global Markets at the University of Chicago Booth School of Business for financial support. Hurst thanks the Peter Wall Institute for Advanced Studies at the University of British Columbia and Notowidigo thanks the Einaudi Institute for both their financial support and hospitality while working on this project.