Will Obama's Housing Plan Increase Unemployment?

There is an economic downside to trying to keep people in their homes, even if underwater. Mike Feroli over at JPMorgan points out the Osward Hypothesis: "Higher homeownership rates increase the natural unemployment rate because it reduces geographical mobility and the ability to move someplace else to find a job."

Feroli applies it to the current economic situation: 

A similar problem may be occurring because of the high number of households with negative equity mortgages.  As the chart below shows, almost 20% of households with mortgages in December had an LTV greater than 100%.  For these underwater households to move, they would have to incur a large capital loss.  This may preclude the option of moving in search of better job opportunities. Given that unemployment rates are up in every state over the past 12 months, would moving really improve households' labor market outcomes?  In fact, as the chart below shows, the regional dispersion of unemployment rates usually increases in recessions, the current episode is no exception.  Because of this, economic well-being arising from mobility is relatively greater in recessions than in boom times.  Such considerations suggest that while averting preventible foreclosures is a suitable policy goal, policymakers should also consider opportunities for household mobility when implementing housing policy.

Me: I am reminded of a story I did on workers in Michigan whose refrigerator factory was going out of business but would not contemplate moving in search of a job.