Washington — Fifteen states have crossed a painful threshold: 10 percent unemployment. More states, and the nation, likely will follow, one of the biggest dangers to an economic recovery.
How consumers behave in the face of rising unemployment will figure prominently in shaping a broader rebound. If they go back into hibernation and sharply cut spending like they did at the end of last year, the recovery could cave in. More likely is that consumers will stay cautious, making for a fragile and slow-moving national economic turnaround, economists said.
The Labor Department on Friday said unemployment topped 10 percent in 15 states and the District of Columbia last month. And the jobless rate in Michigan surpassed 15 percent, the first time any state hit that mark since 1984.
The Federal Reserve this week projected that the national unemployment rate, currently at a 26-year high of 9.5 percent, will pass 10 percent by the end of the year. Most Fed policymakers said it could take “five or six years” for the economy and the labor market to get back on a path of long-term health.
“With so much uncertainty, companies will stay in cost-cutting mode and consumers will watch their spending,” said Steve Cochrane, managing director at Moody’s Economy.com.
The news was not all bad. North Dakota, helped by the oil business, reported the lowest unemployment rate of 4.2 percent in June. It was followed by Nebraska at 5 percent and South Dakota at 5.1 percent, supported by farm businesses. None of those states ever got carried away with the housing boom, either, so their residents didn’t suffer as big a hit to household wealth.
Still, the state unemployment report underscored the damage that the longest recession since World War II has inflicted on companies, workers and communities, and the challenges the economy faces getting back on its feet.
A common theme running through states suffering from high unemployment was heavy layoffs tied to the troubled auto industry and the collapse of the housing market. Workers in manufacturing, construction, retail and finance have been the hardest hit.
“A lot of older industries are having to shut down and many of these jobs will never come back,” said Bernard Baumohl, chief global economist at the Economic Outlook Group.
Take Michigan, ground zero of the recession.
Home to the nation’s struggling auto makers, Michigan has been clobbered by lost factory jobs. Its jobless rate of 15.2 percent in June was the nation’s highest. It was the first time in 25 years that any state has suffered an unemployment rate of at least 15 percent.
If laid-off workers who have given up looking for jobs or have settled for part-time work are included, the state’s jobless rate was 22.5 percent, according to Michigan’s Department of Energy, Labor and Economic Development. Nationwide unemployment by that measure was 16.5 percent in June, the highest on government records dating to 1994.
“In Michigan and elsewhere, the unemployment rate is just the tip of the iceberg of the extensive adverse impact of this ‘Great Recession,”’ said economist Lawrence Mishel, president of the left-leaning Economic Policy Institute.
Many workers have seen hours trimmed, their pay cut and have lost benefits. Combine that with a dismal housing market making it difficult for people to sell their homes and move to other places to find work, and some job-seekers are trapped.
The other states where unemployment topped 10 percent last month were: Alabama, California, Florida, Georgia, Illinois, Indiana, Kentucky, Nevada, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee. In May, 13 states plus the District of Columbia watched their jobless rates surpass 10 percent. Alabama and Georgia joined the list in June.