On Friday the Bureau of Labor Statistics will release the unemployment rate for December. Whatever the numbers look like we are sure to hear a debate about housing and unemployment — are they related, which causes which and does one hold the key to solving the other. A quick look at the way home prices in the 20 S&P/Case-Shiller cities have moved in the year ended in October and unemployment rates reported for those same cities in November suggests that the two are related. The chart shows a scatter diagram of the unemployment rate on the vertical axis and the change (mostly decline) in home prices on the horizontal axis. The higher the unemployment rate, the more home prices dropped.
There doesn’t tell whether falling home prices raise unemployment or high unemployment depresses home prices. In fact, it is quite possible that some other factor is driving both house prices and unemployment. However, since unemployment is an important measure of a local economy, it should be no surprise that one of the better performing cities for home prices, Washington DC, has one of the lowest unemployment rates. The table shows the data used in the chart.