It certainly seems to be the case based on this chart that it’s possible for residential investment to fall without creating mass unemployment. After all, lots of people are quitting jobs or getting laid off all the time. What separates a boom from a bust isn’t that nobody loses a job in a boom, it’s that people get new jobs. If residential investment falls, then proper demand management ensures that something else grows. And in 2006 and 2007 that was evidently happening. Then in 2008 and 2009, it didn’t. But in telling the history of the current malaise, much of the conventional wisdom seems to have forgotten those early years in which macrostabilization policy was working fine.