The States That Recovered Most (and Least) from the Recession

December marked the five-year anniversary of the official beginning of the Great Recession — the most severe economic contraction the United States has experienced since the Great Depression. The recession may have officially ended in June 2009, but the economy still has a long way to go before it returns to normal, and unemployment remains well above prerecession levels.

Click here to see the states that recovered most and least

In November 2007, the month before the recession officially began, there were an estimated 7.3 million unemployed people in the 50 states. The national unemployment rate was 4.7% at the time. In October 2009, the national unemployment rate was 10%, and there were roughly 15 million jobless people in the states. As of November 2012, the national jobless rate was 7.7%, and there were still 11.3 million unemployed people in the states.

24/7 Wall St. reviewed the unemployment rates in the 50 states in recent years, considering prerecession, peak and current unemployment. While change in unemployment can reflect economic growth or stagnation, it can also be misleading. To account for this, we also considered other factors in our analysis of each state’s recovery over the past five years. Based on change in unemployment from peak to current, we identified the states that recovered the most and least from the recession.

The recession impacted every state in the country, but the damage done varied from light, as in the Dakotas, to moderate, as in Maryland and New Mexico, to extreme, as in Nevada, California and Michigan. Similarly, after the economy bottomed out, not every state recovered at the same rate.

Some states have made considerable progress, adding hundreds of thousands of new jobs and reducing unemployment substantially. Several states that were barely hit did not have far to recover and remain in excellent shape relative to the rest of the country. Other states have made almost no progress, with unemployment rates close to their recession peaks. Based on our review, most states followed one of three paths of decline and recovery since the recession began.

The first group saw massive job losses and generally severe declines in both their housing markets and GDP during the recession. These include states hit particularly hard by the collapse of the housing market, such as Arizona, Nevada, and Florida, and states that have struggled for years because of their reliance on the contracting manufacturing sector, such as Michigan and Ohio. In this first group, the unemployment rate has improved substantially, but still remains well above the national rate.

In states such as Indiana, which belongs to the first group, there appears to be evidence of a recovery, but the data should be examined carefully. While the jobless rate is down by nearly three percentage points from its worst level, this is due as much to people giving up looking for work or retiring as it is to new jobs.

In states such as Michigan, which had the highest unemployment rate in the country during the recession, there is evidence of a true recovery. The state was in the top 10 for GDP growth in each of the past two years and “has seen an increase in manufacturing employment over the year,” Bureau of Labor Statistics Chief Economist Martin Kohli told 24/7 Wall St. The real rebound in the automobile industry, Kohli added, “has made Michigan’s recovery stronger than it might otherwise have been.”

The second group of states were barely hit by the recession. They include North Dakota and Wyoming, which were bolstered by a strong energy sector when other state economies were failing. These states’ unemployment rates have hardly increased, and North Dakota’s has even returned to its prerecession level. While some of these states are ranked lower on our list, this is because the unemployment rate had to drop relatively little to get close to prerecession levels.

The final group of states have been unable to show any meaningful recovery. These states, which include New York, New Jersey, and Connecticut, all saw unemployment rise above 9%. However, unlike Michigan and Ohio, which have seen substantial declines in unemployment recently, the economies of these states continues to flounder. New York and New Jersey’s unemployment rates were actually increasing for much of 2012, even as the national unemployment rate was falling.

Kohli explained that each of these states have failed to recover for different reasons. In the case of New Jersey, the casino industry in Atlantic City, which is a big part of the state’s economy, was badly damaged by the recession and continues to struggle. And Superstorm Sandy will probably only make matters worse in the long run.

Based on monthly unemployment data reported by the BLS, 24/7 Wall St. reviewed the recovery progress in each of the 50 states. Each state is ranked by the percentage point decline from its highest unemployment rate during the recession. We also reviewed, by state, the number of employed and unemployed people in the labor force, as well as the change in average weekly earnings by state between November 2007 and October 2012. In addition to BLS data, 24/7 Wall St. reviewed home price change and projection data from Fiserv as of the second quarter of 2012. From the U.S. Census Bureau, we reviewed income and poverty data. We also reviewed gross domestic product change by state for each year during the recession from the Bureau of Economic Analysis, the most recent being 2011.

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