Energy, farming help keep unemployment low for 5 states

? Insulated from the harshest effects of the housing bust — and buoyed by an abundance of energy and agriculture — five contiguous rural states have the lowest unemployment rates in the land.

Recent declines in commodity prices are being felt across Wyoming, North Dakota, South Dakota, Utah and Nebraska, with plans for natural gas and biofuel production being scaled back. However, each of these states boasted unemployment rates of 3.7 percent or lower in November, when the national rate stood at 6.7 percent.

The country’s jobless rate rose to 7.2 percent in December, the Labor Department said Friday, but state-by-state breakdowns for December were not yet available.

‘Insulated, but not isolated’

Removed from major urban centers, the states with the lowest unemployment rates have kept “insulated, but not isolated” from the harshest effects of the recession by largely avoiding the turbulent housing boom and bust that plagued the nation’s coasts, said Ernie Goss, an economics professor at Creighton University in Nebraska.

They also avoided job losses that struck the financial services industry, local economists said, in part because rural bankers tended to be more cautious in their lending and exposure to risky mortgage derivatives that ended up badly for some of Wall Street’s largest investment banks.

“Lending close to home sometimes trims your profit a little bit,” said John Sondey, an economics professor at South Dakota State University in Brookings. But it helps explain why the region’s banks are “much less apt to lay off people.”

While the region has never been a significant manufacturing hub because of its distance from the coasts, some niche industry jobs in wind turbines and agriculture equipment have been lost as part of larger nationwide corporate cutbacks.

Lowest jobless rates

Wyoming, the nation’s least populated state but one of the largest producers of coal and natural gas, posted the lowest jobless rate for November (3.2 percent). Another source of strength is that its largest employment sector — government — remains healthy because the budget has not been plagued by declines in real estate, income and retail tax collections.

The states with the next lowest unemployment are: North Dakota (3.3 percent), South Dakota (3.4 percent), Utah (3.7 percent) and Nebraska (3.7 percent). Michigan leads the U.S. with a 9.6 percent unemployment rate.

North Dakota’s retail sector also received a lift over the past year as Canadians taking advantage of favorable exchange rates drove across the border to shop, according to Shane Goettle, the state’s commerce commissioner.

In Nebraska and the Dakotas, strong wheat, corn and soybeans prices benefit farmers as well as sellers of farm equipment and fertilizer, Sondey said.

Commodity demand

Although crop prices have retreated from last year’s record highs, there is still strong demand for agricultural commodities. And there’s a side benefit to falling fuel prices — it lowers the operating costs of farmers who run diesel-hungry machinery.

Still, plans for numerous ethanol plants have been shelved and VeraSun Energy Corp., the nation’s second largest producer, has filed for bankruptcy. And across the country, producers of oil and natural gas are beginning to scale back or suspend operations.

Goss said there are less obvious cultural and statistical factors that might explain why unemployment rates in the region below the national average.

Midwest and Plains workers who lose their jobs are more likely to relocate than their coastal counterparts, he said, and the margin of error in tracking unemployment in the region is larger because of small sample sizes.