Where Is Unemployment Highest?
The U.S. job market may be holding strong, but not everywhere is thriving. While the national unemployment rate sits at 4%, five states are facing joblessness of 5% or more, with California and Nevada topping the list.
So, what’s going on? A mix of industry shifts, automation, and economic challenges are driving up unemployment. In some states, traditional industries like manufacturing and coal are shrinking, while in others, businesses are struggling with high costs, layoffs, and economic uncertainty. Workers in these states are facing fewer job opportunities, more competition, and sometimes, the need to pivot into different careers.
Key Takeaways
- The five states with the highest level of unemployment, in order of severity, are Nevada, California, Kentucky, Illinois, and Michigan.
- Some states are still feeling the effects of long-term economic shifts, like the decline of coal in Kentucky and factory automation in Michigan.
- Meanwhile, high business costs and economic uncertainty are pushing companies to relocate or cut jobs—contributing to job market struggles in Illinois and California.
According to the U.S. Bureau of Labor Statistics (BLS), these five states have the highest unemployment rates as of December 2024, the most recent data available:
1. Michigan: 5.0%
Michigan is still adjusting to the transformation of its auto industry, which supports more than 20% of jobs in the state.
With production slowdowns, job automation, and major layoffs from carmakers including Stellantis and General Motors, the state’s overreliance on manufacturing has made it tough for many workers to find stable employment.
2. Illinois: 5.2%
A high cost of doing business, steep taxes, and budget troubles have made Illinois a tough place for companies to grow—or even stay.
Though the state is home to corporate giants including United Airlines, McDonald’s, and Kraft Heinz, other major businesses—including Boeing, Caterpillar, and Tyson—have relocated in recent years, leaving job seekers scrambling to find new opportunities.
3. Kentucky: 5.2%
Kentucky long relied on coal mining and manufacturing, but as demand for coal falls and factories introduce more automation, job losses are stacking up.
The state still employs about 4,000 coal miners, but that’s down about 85% over the last 30 years. Many workers try to transition into new industries, but some achieve only sporadic employment while others struggle to find jobs at all.
4. California: 5.5%
Tech layoffs, sky-high living costs, and economic uncertainty are hitting California hard.
While the state remains a major innovation hub, it’s also one of the most expensive places to live, making job losses even tougher on workers.
California has more than 1.5 million jobs in tech—the most of any state—so tough times for the industry can send shock waves through the state’s job market.
Note
If Washington, D.C., were a state, it would be tied with California for having the second-highest unemployment rate at about 5.5%, as of December 2024.
5. Nevada: 5.7%
Nevada has the nation’s highest unemployment rate, and much of that comes down to its reliance on casino tourism and hospitality.
About 26% of workers in Nevada are employed in leisure and hospitality, so when travel slows down, so do jobs—especially in Las Vegas, where tourism has an economic impact of over $85 billion. That’s more than the gross domestic product of states like Montana and North Dakota.
The Bottom Line
Unemployment is rising in these five states for different reasons, but some clear patterns emerge. Michigan and Kentucky are struggling with declines in traditional industries like auto manufacturing and coal, while Illinois faces challenges from high business costs and corporate relocations.
Meanwhile, California’s job market is vulnerable to any slowdown in the technology industry, and Nevada’s reliance on tourism makes it vulnerable to economic slowdowns.
For job seekers, the biggest takeaway is that industry trends and regional economic conditions play a major role in job stability. Workers in declining industries may need to upskill or pivot to new sectors, while those in high-cost states might consider relocating to reduce the added stress of high living costs.
Understanding these factors can help job seekers make smarter career moves in a changing economy.