Unemployment rates have risen sharply in many states where the automotive industry accounts for a large proportion of economic activity, including Michigan, Indiana, Kentucky, Ohio and Tennessee. Jobless rates have also risen sharply in several states exposed to the energy sector, including Oklahoma, Texas, and West Virginia.

The Drivers of Unemployment are Changing

The early stages of this recession were dominated by the direct effects of the housing slump. Unemployment surged in Florida, California, Arizona and Nevada well before it did in the rest of the country, as the bursting of the housing bubble led to a plunge in home sales and house prices. More recently, these markets have shown some signs of moderation. The unemployment rate actually declined slightly in Florida, California and Arizona during April and rose only slightly in Nevada. Other markets hit hard by the housing slump, including Georgia, are also showing some tentative signs of moderation, with the unemployment rate rising much less than it had in recent months. Taken together, the modest improvement in employment conditions in several Sun Belt states hit hard by the housing slump suggests the bulk of the impact on employment from the housing bust may be behind us. Conditions are not necessarily getting better but they are no longer deteriorating as badly as they were a few months ago, which may be yet another sign that the hard hit housing sector is nearing a bottom

Auto Related Job Loss are Now Taking the Lead

Dramatic cutbacks in the motor vehicle sector are the driving force behind layoffs today. Michigan saw its unemployment rate rise 0.3 percentage points to 12.9 percent in April. The increase brings Michigan's jobless rate to its highest level since April 1983. Other states with heavy exposure to the automotive sector saw unemployment rise sharply this past month, including Ohio, where the unemployment rate rose half a percentage point to 10.2 percent, and Tennessee, where the unemployment rate climbed 0.3 percentage point to 9.9 percent. The jobless rate was unchanged at 9.8 percent in Kentucky. Indiana, the other large state with exposure to the domestic automotive industry, saw its jobless rate decline 0.1 percentage point to 9.9 percent. Taken together, the five states with the greatest exposure to the Detroit Three auto manufacturers saw their unemployment rate rise 0.3 percentage point in April to 10.8 percent.

The Energy and Mining States are Running out of Gas

Employment conditions in energy-producing states, which had been one of the nation's few remaining bright spots, dimmed considerably in recent months. The unemployment rate jumped 0.7 percentage point in West Virginia, reflecting a slowdown in coal and natural gas, and also rose in Louisiana and Oklahoma.

The drivers of higher unemployment are changing. Layoffs from the housing bust appear to be cresting, while cutbacks in the motor vehicle sector are accelerating. The energy sector has also switched from a source of strength to a net drag on growth.