What Explains the 2007-2009 Drop in Employment?

Atif Mian, Amir Sufi

Research output: Contribution to journalArticlepeer-review

397 Scopus citations


We show that deterioration in household balance sheets, or the housing net worth channel, played a significant role in the sharp decline in U.S. employment between 2007 and 2009. Counties with a larger decline in housing net worth experience a larger decline in non-tradable employment. This result is not driven by industry-specific supply-side shocks, exposure to the construction sector, policy-induced business uncertainty, or contemporaneous credit supply tightening. We find little evidence of labor market adjustment in response to the housing net worth shock. There is no significant expansion of the tradable sector in counties with the largest decline in housing net worth. Further, there is little evidence of wage adjustment within or emigration out of the hardest hit counties.

Original languageEnglish (US)
Pages (from-to)2197-2223
Number of pages27
Issue number6
StatePublished - Nov 1 2014

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • Employment
  • Great Recession
  • House prices
  • Household debt
  • New worth


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