Posted at: 2009-01-13
The five states with the highest unemployment rates -- Michigan, Rhode Island, South Carolina, California and Oregon -- all have something in common, though: a heightened exposure to the root causes of this downward spiral.
The collapse of housing. The implosion of the auto industry. The meltdown of financial services. The exodus of manufacturing.
All states are feeling the pain, but the worst are getting hammered on multiple fronts:
-- The rotten housing market has punished California lenders and builders, taken an ax to Oregon's timber industry and soured the prospects for construction workers in Rhode Island, where buyers from neighboring states helped drive up home prices.
-- The steady decline of the manufacturing sector has punished Rhode Island and South Carolina, where laid-off factory workers lack the training and job opportunities in an increasingly high-tech economy.
-- The auto industry's pain is Michigan's above all. But it is also being felt in states like South Carolina, where German automaker BMW has cut 500 temporary workers, and in California, where many of dealerships have shut down.
"What makes this a different recession," said Rebecca Blank, an economist at the Brookings Institution, "is that it is so widespread."
During the 2001 recession, which was largely tied to the dot-com collapse, the West had a disproportionate amount of the jobless burden: Oregon, Washington, Alaska and California had the highest unemployment rates. (Mississippi and Washington, D.C. were tied with California.)
There is one region of the country that has largely avoided the country's real estate and manufacturing woes, and as a result has been spared the worst of the recession's pain.
A contiguous cluster of rural states -- Wyoming, North Dakota, South Dakota, Nebraska and Utah -- had the lowest unemployment rates in November, ranging from 3.2 percent to 3.7 percent. The Labor Department on Friday said the national jobless rate in December was 7.2 percent.
Historically high prices for energy and grains have been a boon to their economies, although recent declines in commodity prices are beginning to bite, economists said.
For the majority of the country, the air has come out of a decade-long housing bubble, with home prices falling an average of 20 percent in the past year and almost one in ten mortgages either overdue or in foreclosure. A wide swath of industries is feeling the pain, including real estate agents, bankers, builders, lumber companies and furniture makers.
The real estate bust is at the heart of mounting job losses in California, which has seen its unemployment rate reach 8.4 percent, the third-highest in the nation. In the year ending in November, 71 percent of the nonfarm jobs lost in California were housing-related.
Many of the nation's leading mortgage lenders -- Countrywide Financial, New Century Financial, IndyMac Bancorp, and Fremont General Corp. -- were based in California and have since been bought by larger banks or gone bankrupt.
The recently unemployed in California include Filemon Galvan, 41, of Buena Park, Calif., who was laid off from his job as a carpenter for a housing subcontractor in August.
"It's been a long time since we had a nice family outing," Galvan said in Spanish.
As the country's leading lumber producer, Oregon has also taken a direct hit from housing, with sawmills producing sharply less than a year ago. The slump has cost Oregon about 1,000 logging jobs in the past two years and more than 7,000 jobs in wood manufacturing, which includes plywood mills and the production of door and window frames, said David Cooke, an economist in Oregon's employment department.
Not even tiny Rhode Island, which has the nation's second-highest unemployment rate at 9.3 percent, has been exempt from the housing bust.
The slide has cost Rhode Island more than 3,000 construction jobs in the past year, according to the U.S. Labor Department.
Due to a combination of high energy prices, a strong dollar and competition from overseas, manufacturers have been manhandled for most of this decade -- and ground zero for the loss of factory jobs is Michigan. Its crumbling auto industry explains a large part of the state's nation-leading unemployment rate of 9.6 percent. Around the state, and across the country, the state's automakers have had to close plants and showrooms, cut back workers' hours and reduce wages as consumers' appetite for new cars dwindles along with their job security.
But the manufacturing slowdown has gone far beyond the industrial Midwest. South Carolina's jobless rate has reached 8.4 percent, the third-highest, as it struggles to replace lost textile and apparel manufacturing jobs with the type of high-tech industries that North Carolina has been able to attract.
And Rhode Island, not generally known as a manufacturing hub, has suffered. The industrial conglomerate Textron Inc., which is based in Providence and makes Cessna jets and Bell helicopters, laid off 2,200 of its 43,000 workers last year.
Most of the state's manufacturers are small, however, and have had a tough time weathering the credit crunch.
Lincoln, R.I. resident Larry Miller believed he would retire from the auto parts manufacturer where he first got a job as a newly married 26-year-old. That was two factory closings ago, the most recent being a plant owned by KIK Custom Products, which also had employed his wife.
"The word loyalty is gone," said Miller, shaking his head while sitting at his kitchen table. He found a new job in Massachusetts, but his wife is still looking.
Like South Carolina, the state hasn't yet made a successful transformation from manufacturing to newer-economy industries such as biotech or computing.
"I would summarize Rhode Island's economy as information age, hold the information," said Leonard Lardaro, an economist at the University of Rhode Island.
Rugaber reported from Washington, D.C., and Henry from Lincoln, R.I. Associated Press Writers Jacob Adelman in Los Angeles, Meg Kinnard in Charleston, S.C., Janna Elphinstone in New York, and Mary Hudetz in Portland, Ore., contributed to this report.
Christopher S. Rugaber and Ray Henry, Associated Press Writers