9 States With the Highest Unemployment Rates

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I've always been amazed by how quickly a recession can shoot the unemployment rate higher and, conversely, how long it can take for the jobs market to stabilize and for corporations to begin hiring following a recession.

The recession we witnessed in 2008 through early 2009 could only be compared to the Great Depression, so it should come as no surprise that even after nearly five years of economic growth, the U.S. unemployment rate has only dropped from 10% to 6.7%.

The Bureau of Labor Statistics projects that between 2012 and 2022, 15.6 million new jobs will be created -- an increase of 10.8% from 2012, with the health care sector leading the charge. At the moment, however, job prospects aren't being created equally in all 50 U.S. states.

Source: Bernard Pollack, Flickr.

As we saw earlier this week, based on the November data release from the BLS (link opens PDF), nine states in the U.S. are tracking well below the national unemployment rate of 6.7%. In fact, these are the only nine states where the unemployment rate is below 5%! We noted characteristics about these states that allowed their jobless numbers to stay low and honed in on a few companies that could benefit from these incredibly low unemployment rates.

Today, we'll examine the nine states with the highest unemployment rates. The goal, once again, will be to establish similarities between these states and to use those shared characteristics in a way that could help make us better investors.

Nine states with the highest unemployment rates
Without further ado, here are the nine states with the highest unemployment rates:


Unemployment Rate

Rhode Island
















New Jersey


Source: Bureau of Labor Statistics. Unemployment rates are seasonally adjusted for November 2013.

It may not be readily apparent with this group of high-unemployment states, but they do share discernable similarities.

What stands out to me is that many of these states have well-defined metropolitan areas and/or larger corporate centers than the states we looked at earlier in the week. If you recall, the disadvantage to having large business centers is that it can be difficult for prospective workers to focus on a particular skill that will ensure they get hired. This could be one reason why states with larger populations and bigger metro regions (e.g., California, Michigan, Illinois, and New Jersey) suffer from higher unemployment rates.

Another factor -- or at least something that tends to correlate strongly with high unemployment levels -- is a large number of residual foreclosures in many of these states. The recession hit the entire U.S. housing industry hard, but states such as California and Nevada were throttled by an exceptionally high number of home foreclosures. While not hit as hard immediately, New England states like Rhode Island, as well as some Ohio River Valley and Southern states, have seen home prices rebound slowly in recent months.

This could be bad news for homebuilders focused in these states if they find that their growth rates lag their peers'. It's a tough balance and a catch-22, because homebuilders need to focus their efforts on high-population suburbs, but many of those areas also boast higher unemployment rates. Two homebuilders I believe may struggle are Beazer Homes (NYSE: BZH  ) and M/I Homes (NYSE: MHO  ) . Beazer's primary focus is on the East Coast, where home price growth has averaged just 1% to 2% year over year. Similarly, M/I Homes operates predominantly in the East Coast and the Ohio River Valley, where home price growth rates also remain stagnant. 

Many of these states also lack the shale deposit boost that we saw from the nation's lowest-unemployment states. California, Nevada, Rhode Island, Illinois, Tennessee, and Michigan have relatively negligible shale deposits and/or production on an annual basis.

Source: Energy Information Administration.

Energy has proven to be one of the few steady job-generators in this country, and a noted lack of deposits likely increases unemployment levels in many of these high-unemployment states.

Areas of high unemployment aren't necessarily bad news for all businesses, though. Companies that cater to cost-conscious consumers in hard-hit regions could see sales affected in a positive way. Two companies I'd highlight in this context within these nine states are Wal-Mart (NYSE: WMT  ) and fast-food giant McDonald's (NYSE: MCD  ) .

Wal-Mart, for example, has more than 900 of its 4,807 retail stores located in the nine states with the highest unemployment. Focusing on consumers looking to stretch a tight budget is what Wal-Mart has done best for decades. McDonald's, on the other hand, benefits from the perception that fast food is inherently cheaper than casual dining, which perpetuates its importance in low-income and high-unemployment areas.

High unemployment rates can also be good news for health insurers thanks to the passage of the Patient Protection and Affordable Care Act, better known as Obamacare. It depends on whether a state in question chose to take federal aid and expand its Medicaid program, but a number of unemployed people in the nine states with highest unemployment are able to obtain health insurance because of Obamacare, much to the delight of insurers such as Molina Healthcare (NYSE: MOH  ) .

Molina focuses exclusively on Medicaid-eligible and low-income consumers in a number of states, including California, Michigan, and Illinois. With some 6.3 million Medicaid and CHIP-eligible enrollees now fully signed up for Obamacare through last week, according to the Department of Health and Human Services, Molina would be among the companies expected to benefit.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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