Top 6 States With the Highest Unemployment Rates
Some states continue to have high unemployment rates despite the overall national economic recovery. How does the statistic affect state economies and how are credit unions there coping?
Unemployment rate 7.3%
Credit unions: 377
Total credit union assets: $146.7 billion
State population: 38.3 million
State credit union memberships: 9.8 million
Credit union market penetration: 25%
When the U.S. Bureau of Labor Statistics released its new employment and unemployment summary report for September, economists in California were baffled.
Though the report said the largest over-the-month decrease in employment occurred in California, with nearly 10,000 jobs lost. However, the state’s jobless rate fell from 7.4% in August to 7.3% in September. What’s more, since September 2013, the Golden State has been adding 33,000 jobs a month, second only to Texas, which has been producing more than 34,000 a month on average.
“This was a good month with one very strange number,” Stephen Levy, director of the Center for Continuing Study of the California Economy, told the Los Angeles Times.
Dwight Johnston, chief economist for the California Credit Union League, agreed and explained why the new numbers created some confusion.
“Nonfarm payrolls and the unemployment rates come from two different surveys,” he said. “The drop in nonfarm payrolls was reported at 9,800, but the BLS has seasonal adjustment factors to ‘smooth’ the numbers. Unfortunately, we find that the adjustment factors often distort that number and we see subsequent revisions and/or a big jump in the other direction the following month. None of the other evidence suggests any job losses.”
Like most states, California didn’t go through the Great Recession unscathed, and it took some time for the world’s ninth largest economy to generate enough jobs to substantially cut the jobless numbers. In 2010, the state’s unemployment rate peaked at 12.4%, but it wasn’t until last year when the jobless rate fell below 9%.
But Johnston pointed out the state’s large and diverse economy may have helped many California businesses, including credit unions, navigate through the Great Recession and the slow economic recovery.
“A dominant position in tech and trade has given the state a significant boost,” he said. “As an aside, the Port of Los Angeles just reported an all-time record cargo traffic in September.”
NCUA’s second quarter credit union indicators show the collective median loan growth of California’s credit unions was 3.6%, ranked 26 among the 50 states and the District of Columbia, Guam, Puerto Rico and the Virgin Islands. The state’s credit unions collectively also posted 1.6% in median asset growth, ranked 29, and 1.2% median deposit growth, ranked 29.
Unemployment rate: 7.3%
Credit unions: 18
Total credit union assets: $3.8 billion
State population: 2.7 million
State credit union membership: 328,500
Credit union market penetration: 12%
From 2010 to 2013, Nevada had the highest unemployment rate in the nation.
In 2009, during the darkest days of the Great Recession, the collective ROA of Nevada’s cooperatives plunged to -4.25%, but now the state’s credit unions are profitable with a collective ROA of 1.2%.
While Nevada’s economic recovery may be slower compared to other states, considering the hole the Silver State had to climb out of, it’s back to some semblance of stability, said Johnston, who also serves as chief economist for the Nevada Credit Union League.
“That kind of reflected what was going on with credit unions in Nevada,” he explained. “If you look at the year over year loan growth it was flat. Credit unions in Nevada had to go into hunker down mode for several years just to make sure they would survive. What we are seeing now and what we are optimistic about, assuming the U.S. economy continues to do fairly well, Nevada credit unions are now in the position where they can really participate in future growth.”
The current state’s economic drivers, travel and leisure, trade, transportation and utilities account for about half of the jobs in Nevada. Those jobs are on the rebound and have gotten back to prerecession levels, Johnston said. Business professional sector jobs are back to where they were before the recession and so are government jobs. The hole is in the construction side though there has been some new commercial and residential construction.
“I think credit unions have every reason to be optimistic for the first time in several years,” he said. “Nevada should continue to comeback though it may be slower than in other states.”
NCUA’s second quarter credit union indicators show the collective median loan growth among Nevada’s credit unions was only 0.9%, ranked 51 among the 50 states and the District of Columbia, Guam, Puerto Rico and the Virgin Islands. But the state’s credit unions collectively posted 2.1% in median asset growth, ranked 25, and a 3.1% median deposit growth, ranked 10.
Nevada is seeing some success in attracting new industry to broaden the employment base, Johnston added.
Recently, electric car manufacturer Tesla Motors announced plans to build a large battery factory in northern Nevada. Telsa said it expects to spend up to $5 billion on the project and create about 6,500 jobs when the plant is in full production, according to USA Today.
Unemployment rate: 7.3%
Credit unions: 156
Total credit union assets: $19 billion
State population: 6.4 million
State credit union membership: 1.9 million
Credit union market penetration: 30%
Although Tennessee’s unemployment rate has been above the national average for several years, the state’s economic landscape continues to gradually improve.
“Unemployment is still behind other states, but the outlook is promising, especially when we look at manufacturing,” said Murat Arik, interim director of Business and Economic Research for the Jones College of Business at the Middle Tennessee State University in Mufreesboro.
For example, automakers Volkswagen, Nissan and General Motors announced major production expansion plans that are expected to generate thousands of new jobs.
Arik said he believes the state’s unemployment rate remains high because a lot of traditional manufacturing jobs had been lost to the Great Recession. Those jobs, however, are being replaced by manufacturing jobs that require highly skilled workers.
“Those who lost traditional manufacturing jobs were unable to move quickly to fill in the new type of manufacturing jobs, so we had a skills gap in the workforce,” he said.
To address that skills gap, Fred Robinson, president/CEO of the Tennessee Credit Union League in Chattanooga, said the Tennessee legislature approved a bill that will enable high school graduates to attend a two-year college or technical school tuition free starting in 2015. In mid-October, local media reported 35,000 Tennessee students applied for free community college.
“Our state is working to grow out of that unemployment rate,” Robinson said.
Despite the high jobless rate, Robinson said credit unions have not been adversely affected.
“Our net worth is more than 12.5% and our delinquency rate is only 0.5%, which is below the national average. Our loan growth rate is pretty healthy, and it is extremely healthy in the new and used car markets and in the first mortgage market,” he said.
Matt Jernigan, senior vice president and chief operating officer for the $1.6 billion Ascend Federal Credit Union in Tullahoma, said his cooperative has not experienced a significant impact because of the state’s high unemployment rate.
“The credit union manually underwrites all loans, which provide an opportunity to effectively manage credit risk while also ensuring that we match our members’ financial needs to the appropriate product or service,” he said.
For members hit by hard times, however, Ascend offers free financial counseling through a third party.
“Additionally, we have invested over $19 million during 2014 into our local job markets through business lending, which has helped create jobs within our market area,” Jernigan said.
Unemployment Rate: 7.6%
Credit Unions: 21
Total Credit Union Assets: $5 billion
State Population: 1 million
State credit union membership: 344,000
Credit union market penetration: 34%
Although the Ocean State’s jobless rate has dropped considerably from its peak high from 11.7% in 2010 to 7.6% in September 2014, the state’s recovery has been slow.
David Root, president/CEO of the $236 million Coventry Credit Union in Coventry, is concerned about the state’s recovery and fears it will be quite some time before the economy fully recovers.
“Rhode Island, as a whole, had 222 bankruptcies declared last quarter, and we had seven of them,” Root said. “So here we are with a $150 million loan portfolio, racking up three percent of the state’s bankruptcies in one period of time. Luckily, we are still profitable, be we could be a lot more profitable if we didn’t charge off those loans.”
But that number of bankruptcies at Coventry CU may be an anomaly because Rhode Island’s bankruptcy per 1,000 members is only 0.6%, as of June 2014, down from 0.8% in June 2013, according to CUNA.
Overall, Rhode Island credit unions are doing pretty well, Paul Gentile, president/CEO of the Credit Union Association of Rhode Island, said. He pointed out that the collective median loan growth of the state’s credit union was 3.4% at the end of the second quarter and their net worth was more than 10 percent.
Leonard Lardaro, a professor of economics at the University of Rhode Island, however, said the state’s recovery is slower than other states because elected officials were asleep at the wheel.
“Well run states were in crisis mode during the Great Recession and they were making changes structurally,” he said. “We did virtually nothing. Even when we had been losing population consistently from July 2004 through June 2012, the state elected officials ignored it.”
While the national recovery has helped produce some new jobs in the state, Lardaro said Rhode Island’s unemployment rate declined primarily because residents landed jobs in Massachusetts and Connecticut where economic growth has been stronger.
“It’s a very easy commute to Connecticut and Massachusetts from Rhode Island,” he said. “Where would we have been without that? Well, you could only speculate. We have recovered barely half of the jobs we lost during the Great Recession and that is a big problem.”
Lardaro said he is hopeful that a new governor and new state legislators to be elected in November will make positive structural changes to boost economic activity such as reducing the corporate tax rate, cutting the high costs of doing business and eliminating unnecessary state regulations.
“We have to make sure that we are much more amenable to national growth,” he said. “We don’t have enough of a presence and growth in the technology industry and we grossly underfunded public higher education for well over a decade. In the information age that is not such a smart idea.”
Unemployment rate: 7.7%
Credit unions: 83
Total credit union assets: $5.8 billion
State population: 2.9 million
State credit union membership: 588,000
Credit union market penetration: 20%
Since 2000, Mississippi has had an unemployment rate above the national average.
In that year, the state’s jobless rate stood at 5.7% when the national unemployment rate was just 4%, or what many economists consider full employment. Mississippi’s unemployment rate peaked at 10.6% in 2010 and 2011, according to the U.S. Bureau of Labor Statistics.
“This is kind of normal,” Mississippi Credit Union League President/CEO Charles Elliott Jr. said. “The unemployment rate went up to more than 10% and now it’s down to about 7%, but we didn’t notice any negative effects or positive effects (because of the jobless rate) that I am aware of statewide.”
The NCUA’s second quarter credit union indicators show the collective median loan growth among Mississippi’s credit unions was 2.4%, ranked 41st among the 50 states and the District of Columbia, Guam, Puerto Rico and the Virgin Islands. The state’s credit unions collectively also posted 1.4% in median asset growth, ranked 32nd, and a 1.2% median deposit growth, ranked 32nd.. The state’s delinquency rate was 0.9%, equal to the national rate, and the total net worth of Mississippi’s credit unions was 13.2%.
Elliott surmised Mississippi’s jobless rate had no positive or negative effect on credit unions because the state did not have substantial increases or decreases in home prices that other states experienced before and during the Great Recession.
Mississippi’s employment picture has been improving, however, as its jobless rate fell by nearly one percentage point from 8.6% in 2013 to its current 7.7%. The state’s largest economic drivers are manufacturing, agriculture, health care and technology.
The $182 million Hope Credit Union in Jackson said it is working to drive down that jobless rate even further.
“One of the ways Hope is directly addressing this unemployment challenge is through its member business loans,” Ed Sivak, chief communications and policy analyst for the Hope Enterprise Corporation, said. “Hope is unique because we do a lot of business lending annually and it’s one of the tools in our box that is directly related to creating jobs, and not just any type of job.”
Hope Enterprise Corporation is the community development arm of Hope CU.
Of Hope CU’s business loan clients last year, he said, 80% provided some health insurance, which is important in a state that has a high rate of uninsured individuals.
“Our average wage at businesses we financed is $28,000, which is higher than the $20,000 annual income of the poverty level threshold for a family of three,” Sivak explained. “That is one of the ways we are addressing some of the employment challenges and work with growing our businesses by providing them with capital, particularly to entrepreneurs who may not have other options.”
Unemployment rate: 7.9%
Credit unions: 137
Total credit union assets: $19 billion
State population: 9.9 million
State credit union membership: 2 million
Credit union market penetration: 20%
Jeff Humpheys, director of the Selig Center for Economic Growth at the Terry College of Business at the University of Georgia in Athens, said Georgia’s economy was hit hard during the Great Recession because it was heavily invested in home building and real estate development.
The crash of Georgia’s housing market also led to the sharp decline in manufacturing since most of the state’s manufacturers produced floor coverings, building materials, lumber and other wood products. As a result, transportation and logistics services also slowed substantially throughout the Peach State, Humphreys said.
What’s more, the housing crisis caused banks to close shop. From 2008 to 2011, Georgia led the nation, by far, with 74 bank failures, according to a report by the General Accountability Office in Washington. Florida was the second highest with 58 bank failures and California was third with 38.
That may be another big reason why Georgia’s unemployment rate has remained above the national average for nearly seven years.
“Most of the bank failures were community banks and that dried up the relationship-based lending entrepreneurs and small businesses rely on, so we couldn’t get the entrepreneurial engine going again very quickly after the Great Recession” Humphreys explained.
Financing also dried up because many entrepreneurs and small businesses leveraged the equity in their homes to secure loans that get their businesses going, he added.
“That equity has been slower to come back because even though home prices are rising very rapidly in Georgia, particularly in the Atlanta metro area, the assessed and appraised values are lagging the market value of the homes,” Humphreys said.
NCUA’s second quarter credit union indicators show the collective median loan growth among the state’s cooperatives totaled 2.6%, ranked 37 among the 50 states and the District of Columbia, Guam, Puerto Rico and the Virgin Islands. The state’s credit unions also collectively posted 1% asset growth and only 0.7% deposit growth, both ranked 39. The state’s delinquency rate stood at 0.9%, which was par with the national delinquency rate. The total net worth of Georgia’s credit unions was 11.6%.