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There are few places in the nation that are escaping the pain of the current labor
market downturn. Just eight states and the District of Columbia added jobs over the
last year, while job losses have exceeded 100,000 in nine states over that same period.
Michigan, Idaho, Arizona and Rhode Island have all lost more than four percent of
their nonfarm jobs in the last year and there is little reason to believe that the layoffs
will subside in the near future. Nationwide job losses will most likely be heaviest
during the first half of this year, as businesses ramp down production and bring
capacity back in line with weaker overall global economic conditions. While job
losses are expected to taper off later this year, they should still remain quite
formidable. We expect total job losses for this recession to reach 5 million.
While the unemployment rate has risen sharply over the past year, several states
have seen dramatic increases. Two states, Michigan and Rhode Island, currently
have unemployment rates in the double digits and several more states are getting
close. Not only does Rhode Island have one of the highest unemployment rates it
also has seen the fastest run up, an astonishing 4.8 percentage points over the past
year. In fact, every state in the nation has seen its unemployment rate rise over the
past year. The best states in the nation in both level of unemployment and only a
modest increase over the last year are Wyoming and North Dakota, which have both
benefited from gains in the energy sector.
Figure 2
Unemployment Highlights
(December 2008)
Year-over-Year
Unemployment Percentage Point
Rank State Rate Rank State Change
1 Michigan 10.6% 1 Rhode Island 4.8%
2 Rhode Island 10.0% 2 North Carolina 4.0%
3 South Carolina 9.5% 3 Nevada 3.9%
4 California 9.3% 4 Idaho 3.7%
5 Nevada 9.1% 5 Indiana 3.7%
47 Utah 4.3% 47 Iowa 0.8%
48 Nebraska 4.0% 48 Arkansas 0.7%
49 South Dakota 3.9% 49 Wyoming 0.3%
50 North Dakota 3.5% 50 West Virginia 0.3%
51 Wyoming 3.4% 51 North Dakota 0.3%
Source: U.S. Department of Labor and Wachovia
The housing slump is still very much the driving force behind the deterioration in
labor market conditions. California regained the title of ‘most job losses’ over the
past year with the December data, a title that had been held for several months by
Florida. Those two states are racing neck-to-neck for the biggest housing-related
employment losses. Residential construction and all the associated industries, such
as building products, mortgage finance and retailing, have been hit hard in both
states. The current slump will likely go down as one of the worst ever in the modern
era for both states. That said, the long-run positive fundamentals for California and
Florida will ultimately reassert themselves and help drive a recovery. Unfortunately,
that turnaround is still a few years away. We expect Florida may lose another
200,000 jobs or more through the rest of the cycle and the unemployment rate could
reach 10.5 percent by late this year or 2010. California will likely continue to shed
jobs as well ultimately losing upwards of 700,000 before the end of the cycle with an
unemployment rate that ultimately will likely exceed 11 percent.
Texas employment growth over the past year is still a strong 125,000 jobs—the
largest gain in the nation. However, nonfarm employment peaked in the state in
October and has begun an accelerating descent, off 37,000 jobs in the last two months
alone. Once one of the last hopes for steady growth in a national slowdown, even
2
State Employment: December 2008
January 28, 2009 REGIONAL ECONOMIC COMMENTARY
December 2008
<-2.5%
-2.5% < -1.9%
-1.9% < -1.3%
-1.3% < -0.5%
>-0.5%
3
State Employment: December 2008
January 28, 2009 REGIONAL ECONOMIC COMMENTARY
Figure 4
Civilian Unemployment Rate
December 2008
<5.1%
5.1% < 6.2%
6.2% < 7.0%
7.0% < 8.0%
>8.0%
Figure 5
Change in Civilian Unemployment Rate
(Year over Year Percentage Point Change)
December 2008
<1.2%
1.2% < 2.1%
2.1% < 2.4%
2.4% < 3.2%
>3.2%
4
Wachovia Economics Group