States of Unemployment

Today, the BLS released the unemployment rates by state for May. It shows that the rise in unemployment has been widespread and few regions have been spared.

There are now 14 with double-digit unemployment (27.4%) vs. none a year ago. Eight states have seen their unemployment rates increase by 5.0 points or more, and nine more have seen increases of at least four points.

While all states have seen unemployment go up, four states have had increases of less than two points, and three of them were low unemployment states to begin with.  Only two states, Nebraska and North Dakota, have unemployment rates that are under 5%, while a year ago 25 of states did.

The states with double digit unemployment include many of the nation's most populated states (CA, FL, IL, IN, MI, NC, OH).  High rates of unemployment will mean more loan defaults and foreclosures. Thus banks with high exposure to high unemployment states are particularly vulnerable:

Wells Fargo (WFC - Analyst Report) has lots of exposure to California and to the Carolinas (thanks to its purchase of Wachovia). Fifth Third (FITB - Analyst Report) is highly exposed to Ohio, Michigan and Florida. Comerica (CMA - Analyst Report) has a big exposure to Michigan.

I am not aware of any publically traded bank of any size that is mostly exposed to the upper Great Plains, which is the strongest area of the country. The regional pattern does suggest that the most untouched part of the economy is agriculture, or at least that states where agriculture is especially important are faring better than the rest of the country. This is one major difference with the Great Depression, when the rural economy suffered just as much as the urban one did.