Geographic mobility has the potential to mitigate declines in consumer financial health following a negative income shock, say Cleveland Fed researchers

Examining communities impacted by the recent boom and bust of oil drilling in the United States, Federal Reserve Bank of Cleveland researchers Rawley Heimer, Timothy Stehulak, and Caitlin Treanor find that geographic mobility following the bust is associated with stronger consumer financial health.

The researchers focus on the residents of “boom towns”—areas that experienced a marked increase in oil drilling activity starting in 2010 and a bust sometime thereafter. They use the New York Fed - Consumer Credit Panel to examine the effects of the decline in oil drilling on the financial health of those who leave and those who stay in these boom towns following the peak drilling activity (as measured by oil rig counts).

“As these boom towns start to experience a decline in production, those who are able to relocate have lower credit utilization, lower past-due balances, and fewer delinquent accounts,” say the researchers, “all while having more new originations and higher credit limits in the period after the boom.”

While geographic mobility appears to have quantifiable benefits for consumer financial health, the researchers say it is important to recognize that many individuals could have limited opportunities to relocate when local economic activity declines, noting that family or personal circumstances can make relocation infeasible.

Read Geographic Mobility and Consumer Financial Health: Evidence from Oil Production Boom Towns

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892