Another sign that California's economic recovery is going slowly: The Golden State now boasts the second-highest unemployment rate in the nation.
After months of ranking No. 3, California has swapped places with Michigan. California's 12.5% unemployment rate in December ranks only behind Nevada's 14.5% jobless rate, according to the latest rankings from the Bureau of Labor Statistics released Tuesday.
Meanwhile, Michigan ended 2010 with a jobless rate of 11.7%. That's down from 14.5% in December 2009, when the industrial state was saddled with the worst unemployment in the country.
"For a long time, we led the nation for something that you'd just as soon not lead the nation in," said Charles Ballard, an economics professor at Michigan State University. "Now California has caught us."
There are a number of explanations for Michigan's improving unemployment numbers, not all of them positive. Michigan's labor force has shed 73,000 workers over the last year, as the unemployed gave up looking for work or moved out of state. A smaller labor force helps drive down unemployment numbers because fewer people are counted as looking for work. During the same time period, California has added 113,200 to its labor force.
Michigan also benefited from many of President Obama's economic policies, Ballard said. The bailout of the auto industry, the stimulus package and the Federal Reserve's bond-buying program to boost growth have helped Michigan get back on its feet. Now auto plants are adding shifts and hiring workers, Ballard said.
"It looks like the worst is behind us," he said. "But it's certainly a leaner economy than it was."
California may not emerge from its protracted economic crisis so easily. Like Nevada and Florida, the other states at the top of the unemployment charts, a housing bust left hundreds of thousands of unemployed in its wake.
California is also grappling with state budget issues that have led to significant job cuts over the last few months. With construction and government remaining weak, economists say there's little hope for a drop in the unemployment rate any time soon.
In other words, California: Get used to being No. 2. It's lonely at the top.