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This report is available on www.wachovia.com/economics and on Bloomberg at WBEC
R
EGIONAL
E
CONOMIC
C
OMMENTARY
 
 January 28, 2009
State Employment: December 2008
 
Mark Vitner, Senior Economist
mark.vitner@wachovia.com704-383-5653
Adam G. York, Economic Analyst
adam.york@wachovia.com704-715-9660
Kim A. Whelan, Economic Analyst
kim.whelan@wachovia.com704-715-8457
The national economic collapse has hit the labor market hard over the last fewmonths. While revised figures will not be out until the end of next week, it hasbecome quite clear that 2008 will be one of the worst years for the labor market inquite some time. The fourth quarter turned out to be the worst quarter for job losses(more than 1.5 million) across the nation since the aftermath of World War II. As aresult of the massive job losses and continued gains in population the unemploymentrate has soared nationwide, up 2.3 percentage points from the end of 2007.
Figure 1
 
Nonfarm Employment Highlights
(December 2008)
Rank State Year-over-YearChange inThousands Rank State Year-over-YearPercent Change
1 Texas 153.7 1 Wyoming 2.22%2 Oklahoma 15.2 2 Texas 1.47%3 Louisiana 8.2 3 Oklahoma 0.97%4 Wyoming 6.5 4 Alaska 0.88%5 South Dakota 3.4 5 South Dakota 0.83%47 New York (119.9) 47 Indiana (3.74%)48 North Carolina (120.2) 48 Michigan (4.09%)49 Michigan (173.0) 49 Idaho (4.34%)50 Florida (255.2) 50 Arizona (4.34%)51 California (257.4) 51 Rhode Island (4.48%)
 
Source: U.S. Department of Labor and Wachovia
There are few places in the nation that are escaping the pain of the current labormarket downturn. Just eight states and the District of Columbia added jobs over thelast 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 oftheir nonfarm jobs in the last year and there is little reason to believe that the layoffswill subside in the near future. Nationwide job losses will most likely be heaviest
 
State Employment: December 2008 January 28, 2009
 
REGIONAL ECONOMIC COMMENTARY
during the first half of this year, as businesses ramp down production and bringcapacity back in line with weaker overall global economic conditions. While joblosses are expected to taper off later this year, they should still remain quiteformidable. We expect total job losses for this recession to reach 5 million.While the unemployment rate has risen sharply over the past year, several stateshave seen dramatic increases. Two states,
Michigan
and
Rhode Island
, currentlyhave unemployment rates in the double digits and several more states are gettingclose. Not only does Rhode Island have one of the highest unemployment rates italso has seen the fastest run up, an astonishing 4.8 percentage points over the pastyear. In fact, every state in the nation has seen its unemployment rate rise over thepast year. The best states in the nation in both level of unemployment and only amodest increase over the last year are
 Wyoming 
and
North Dakota
, which have bothbenefited from gains in the energy sector.
Figure 2
Unemployment Highlights
(December 2008)
RankStateUnemploymentRateRankState Year-over-YearPercentage PointChange
1Michigan10.6%1Rhode Island4.8%2Rhode Island10.0%2North Carolina4.0%3South Carolina9.5%3Nevada3.9%4California9.3%4Idaho3.7%5Nevada9.1%5Indiana3.7%47Utah4.3%47Iowa0.8%48Nebraska4.0%48Arkansas0.7%49South Dakota3.9%49Wyoming0.3%50North Dakota3.5%50West Virginia0.3%51Wyoming3.4%51North Dakota0.3%
 
Source: U.S. Department of Labor and Wachovia
The housing slump is still very much the driving force behind the deterioration inlabor market conditions.
California
regained the title of ‘most job losses’ over thepast 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-relatedemployment losses. Residential construction and all the associated industries, suchas building products, mortgage finance and retailing, have been hit hard in bothstates. The current slump will likely go down as one of the worst ever in the modernera for both states. That said, the long-run positive fundamentals for California andFlorida will ultimately reassert themselves and help drive a recovery. Unfortunately,that turnaround is still a few years away. We expect Florida may lose another200,000 jobs or more through the rest of the cycle and the unemployment rate couldreach 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 anunemployment rate that ultimately will likely exceed 11 percent.
Texas
employment growth over the past year is still a strong 125,000 jobs—thelargest gain in the nation. However, nonfarm employment peaked in the state inOctober and has begun an accelerating descent, off 37,000 jobs in the last two monthsalone. Once one of the last hopes for steady growth in a national slowdown, even2
 
State Employment: December 2008 January 28, 2009
 
REGIONAL ECONOMIC COMMENTARY
 Texas has succumbed to the pressures of a global financial crisis, collapsingcommodity prices and what will likely be the deepest recession in more than a halfcentury.
North Carolina
, like Texas, was once considered a glowing star in a dimmingeconomic sky, but a sharp downturn in recent months has hit the Tar Heel stateparticularly hard. While best known recently for its growth in high technology andfinancial services, North Carolina also has one of the nation’s largest factory sectors.The state’s manufacturing, construction and professional & business service sectorshave lost more than seven percent of their respective employment bases over the pastyear. The unemployment rate has leapt higher as a result of the job losses and nearrecord population growth in 2008. The unemployment rate now stands at 8.7 percentand is second only to Rhode Island in the pace of increase over the past year.While we would like to point to some pockets of optimism across the country, theresimply are not many to identify. Reductions in output and employment areunusually broad based and are impacting even traditionally recession-resilient areaslike health care, education, and state and local governments. As a result, even statesthat traditionally hold up well in recessions are being hurt. While the breadth of thisdownturn is unprecedented, the hardest hit areas are not all that surprising.Manufacturing is taking a huge hit, which is impacting manufacturing-intensiveareas in the Midwest, the South and California. Residential construction is the othernotable weak spot and areas where homebuilding boomed during the past decade,such as Florida, California, Arizona and
Georgia
, are being disproportionatelyimpacted. Finally, one of the brightest spots for the economy had been energy andcommodity production, which had helped boost Texas and the Rocky Mountainstates. The global economic slump has put an end to the commodity boom, however,and even these states are now feeling the heat from the slump.
Figure 3
Nonfarm Employment Growth
(Year-over-Year Percent Change)December 2008
<-2.5%-2.5% < -1.9%-1.9% < -1.3%-1.3% < -0.5%>-0.5%
 
Source: U.S. Department of Labor and Wachovia
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