States with highest unemployment rates share root causes

Unlike the last recession, today's unemployment hot spots are all over the map.

The five states with the highest unemployment rates -- Michigan, Rhode Island, South Carolina, California and Oregon -- all have something in common, though: a heightened exposure to the root causes of this downward spiral.

The collapse of housing. The implosion of the auto industry. The meltdown of financial services. The exodus of manufacturing.

All states are feeling the pain, but the worst are getting hammered on multiple fronts:

-- The rotten housing market has punished California lenders and builders, taken an ax to Oregon's timber industry and soured the prospects for construction workers in Rhode Island, where buyers from neighboring states helped drive up home prices.

-- The steady decline of the manufacturing sector has punished Rhode Island and South Carolina, where laid-off factory workers lack the training and job opportunities in an increasingly high-tech economy.

-- The auto industry's pain is Michigan's above all. But it is also being felt in states like South Carolina, where German automaker BMW has cut 500 temporary workers, and in California, where many of dealerships have shut down.

"What makes this a different recession," said Rebecca Blank, an economist at the Brookings Institution, "is that it is so widespread."

During the 2001 recession, which was largely tied to the dot-com collapse, the West had a disproportionate amount of the jobless burden: Oregon, Washington, Alaska and California had the highest unemployment rates. (Mississippi and Washington, D.C. were tied with California.)

There is one region of the country that has largely avoided the country's real estate and manufacturing woes, and as a result has been spared the worst of the recession's pain.

A contiguous cluster of rural states -- Wyoming, North Dakota, South Dakota, Nebraska and Utah -- had the lowest unemployment rates in November, ranging from 3.2 percent to 3.7 percent. The Labor Department on Friday said the national jobless rate in December was 7.2 percent.

Historically high prices for energy and grains have been a boon to their economies, although recent declines in commodity prices are beginning to bite, economists said.

For the majority of the country, the air has come out of a decade-long housing bubble, with home prices falling an average of 20 percent in the past year and almost one in ten mortgages either overdue or in foreclosure. A wide swath of industries is feeling the pain, including real estate agents, bankers, builders, lumber companies and furniture makers.

The real estate bust is at the heart of mounting job losses in California, which has seen its unemployment rate reach 8.4 percent, the third-highest in the nation. In the year ending in November, 71 percent of the nonfarm jobs lost in California were housing-related.

Many of the nation's leading mortgage lenders -- Countrywide Financial, New Century Financial, IndyMac Bancorp, and Fremont General Corp. -- were based in California and have since been bought by larger banks or gone bankrupt.

The recently unemployed in California include Filemon Galvan, 41, of Buena Park, Calif., who was laid off from his job as a carpenter for a housing subcontractor in August.

"It's been a long time since we had a nice family outing," Galvan said in Spanish.

As the country's leading lumber producer, Oregon has also taken a direct hit from housing, with sawmills producing sharply less than a year ago. The slump has cost Oregon about 1,000 logging jobs in the past two years and more than 7,000 jobs in wood manufacturing, which includes plywood mills and the production of door and window frames, said David Cooke, an economist in Oregon's employment department.

Not even tiny Rhode Island, which has the nation's second-highest unemployment rate at 9.3 percent, has been exempt from the housing bust.

The slide has cost Rhode Island more than 3,000 construction jobs in the past year, according to the U.S. Labor Department.

Due to a combination of high energy prices, a strong dollar and competition from overseas, manufacturers have been manhandled for most of this decade -- and ground zero for the loss of factory jobs is Michigan. Its crumbling auto industry explains a large part of the state's nation-leading unemployment rate of 9.6 percent. Around the state, and across the country, the state's automakers have had to close plants and showrooms, cut back workers' hours and reduce wages as consumers' appetite for new cars dwindles along with their job security.

But the manufacturing slowdown has gone far beyond the industrial Midwest. South Carolina's jobless rate has reached 8.4 percent, the third-highest, as it struggles to replace lost textile and apparel manufacturing jobs with the type of high-tech industries that North Carolina has been able to attract.

And Rhode Island, not generally known as a manufacturing hub, has suffered. The industrial conglomerate Textron Inc., which is based in Providence and makes Cessna jets and Bell helicopters, laid off 2,200 of its 43,000 workers last year.

Most of the state's manufacturers are small, however, and have had a tough time weathering the credit crunch.

Lincoln, R.I. resident Larry Miller believed he would retire from the auto parts manufacturer where he first got a job as a newly married 26-year-old. That was two factory closings ago, the most recent being a plant owned by KIK Custom Products, which also had employed his wife.

"The word loyalty is gone," said Miller, shaking his head while sitting at his kitchen table. He found a new job in Massachusetts, but his wife is still looking.

Like South Carolina, the state hasn't yet made a successful transformation from manufacturing to newer-economy industries such as biotech or computing.

"I would summarize Rhode Island's economy as information age, hold the information," said Leonard Lardaro, an economist at the University of Rhode Island.

Housing Blogs Throw Stones

"The current real-estate market has brought out the worst in people," says David Gibbons, director of community relations for Seattle-based Zillow.com, a real-estate site where people can comment on discussion boards.

"Simply laughable. Ugly exterior and priced with copious amounts of grandiosity."

"This is what happens when you are filthy rich. No one tells you, you have bad taste."

Selling your home could be bad for your ego. The above quotes are recent comments on real-estate blogs -- online journals that often post photos of new sales listings and allow readers to add their thoughts anonymously. Thanks to the housing crisis, real-estate blogs are blooming not only in number, but in nastiness, as thousands of strangers swap stinging critiques of high-end homes hitting the market.

And bloggers say the pricier the house, the juicier the target. On SocketSite.com, a recent posting about a 7,000-square-foot home with four adjoining units listed at $16.95 million attracted about a dozen comments, including the suggestion that the home "be bought by Transylvania for use as their embassy." An $11.5 million listing on the blog Real Estate Stalker inspired this alliteration: "Everything inside is nothing but beige and barf!"

The surge in verbal abuse doesn't seem to be damaging the housing-blog business. Curbed.com, which has sites for New York, Los Angeles and San Francisco, has seen its unique-visitor numbers climb to a million a month from 400,000 a month last year. Traffic has doubled on Brownstoner.com in the past year and spiked 11% in the first two weeks of October, compared to the month prior. At SocketSite.com comments are up about 25% over the past three months alone.

Some real-estate veterans chalk up the anger to frustrated would-be buyers living in cities where home prices are still out of reach. "Blogs are a great forum to vent that anger," says Will Rogers, an agent with New York-based Fenwick Keats Goodstein, whose client's brownstone, listed at $2.99 million, was recently slammed on a blog for its resemblance to an "average rental apartment."

The phenomenon is also helped by the growing popularity of posting multiple photos of a new listing online, which allow would-be critics to tour properties from the comfort of their computers.

The skewering of fancy properties can be wicked fun -- unless you're the owner. One day this month, neuroradiologist Luis Fernandez was taken aback to see his four-story, 4,100-square-foot Brooklyn home, listed for sale at $2.5 million, on Brownstoner.com. The blog razzed Dr. Fernandez's home, calling it "McMansion chic" and predicting price reductions.

Readers quickly chimed in, citing overuse of track lighting and black granite and calling the border on the bathtub "hideous" and the furniture "cheesy." "They're probably hipsters -- people who live really grungy," counters Dr. Fernandez, noting that the bathroom tiles are handmade and the "cheesy" furniture cost over $100,000. "I didn't really want to buy it -- that was my wife -- but that's another subject," he adds.

Dr. Fernandez also notes that a smaller house in the neighborhood recently sold for more and scoffs at the notion that he ruined the character with his renovations. Still, he says his five-year-old son was thrilled to see it on the computer.

In San Francisco, Andrew Lochart had never heard of SocketSite.com until he was told by his agent that his newly listed three-bedroom, mid-century-modern home had debuted on the site this month. When he read the comments, Mr. Lochart says he was tempted to shoot back at his critics and post "Let's see photos of your house." He didn't, and the house, with an asking price of $1.1 million, subsequently had three offers and sold.

Some owners are fighting back. When commenters attacked his Manhattan Beach, Calif. house, Peter Bohlinger began defending the home with his own anonymous posts. But after a few weeks, Mr. Bohlinger, a real-estate investor, gave up. "I have just stopped reading it because it was making me so mad," he says. His house still hasn't sold.

Some agents are also going on the offensive. Northwest Multiple Listings Service recently won a case against Redfin.com to stop the online company from letting people search and comment on its listings. But most agents acknowledge they have no way to control what people say. "It's damaging. It's negative and destructive, mean-spirited and pointless," says Judith Lief, an agent with Warren Lewis Realty Associates in New York. "What can I do?"

Web sites say any misinformation can be easily corrected. And while agents worry about negative posts from rivals, sites say agents rarely comment in disguise to talk a property down. Instead, agents usually try to shill their own listings. "Agents come on and try to list 20 different comments under 20 different names, all saying positive things," says Adam Koval, SocketSite.com's editor in chief.

At least one seller figured out how to tame the mob. On Sept. 30, Skei Saulnier learned from friends that her 1,020-square-foot Brooklyn duplex, on the market for $849,000, had popped up on Brownstoner.com. She logged on and learned that her condo's kitchen is "functionally obsolescent" and her bedrooms are too small.

So the 31-year-old stay-at-home mom began posting herself, identifying herself as the owner and replying directly to each criticism. "I just cooked dinner for my family in my 'functionally obsolescent' kitchen," she wrote. "It's one of my favorite rooms in the house and whenever we have company we spend most of our time in the eat-in kitchen."

The reaction: lots of praise. "Brave to come here and post. I commend you," was a typical response. The comments became much nicer after that. Ms. Saulnier says she then invited her commenters to come to the open house.