By Lisa Lambert
(Reuters) - Unemployment rates dropped in most states in March from the year before, including California where joblessness fell to a four-year low, as the recovery picked up in places hit hard by the housing downturn.
Federal data released on Friday showed that, altogether, unemployment rates fell from March 2012 in 39 states and the District of Columbia, increased in eight, and were the same in three. From February, rates dropped in 26 states and the District of Columbia, rose in seven and were unchanged in 17.
Nevada had the sharpest decrease over the year - the rate fell to 9.7 percent from 11.6 percent in March 2012.
In California the unemployment rate fell to 9.4 percent, the lowest since December 2008 and more than a percentage point below March 2012, when it was 10.7 percent.
The state's economic recovery is now taking hold in areas where the housing bust wrought the most damage, according to Stephen Levy director of the Center for Continuing Study of the California Economy, a private research organization in Palo Alto.
"The good news is that the recovery is spreading beyond the <San Francisco> Bay Area. There are parts of southern California, such as Los Angeles County, that were badly hit by the housing crash, that are showing signs of recovery," he said.
California, he added, "is emerging again as an economic growth leader led by traditional strengths in technology, trade, tourism, agriculture and the application of creativity to the design of goods and services in demand worldwide".
California and Nevada, two places where housing had once flourished, have consistently had some of the highest unemployment rates in the country over the last few years. Even with the drops in March, Nevada held the highest unemployment rate of all the states and California the third highest.
Nevada's rate also rose from 9.6 percent in February and the state lost 2,900 jobs during the month, when seasonally adjusted.
"So far this year, job growth appears to be slowing a bit after exceeding expectations in the second half of 2012," said Bill Anderson, chief economist for Nevada's employment department, in a statement.
"Despite the decline in non-farm payroll jobs and a slight increase in the unemployment rate, nearly all over-the-year comparisons are evidence of an ongoing mild recovery in Nevada's labor market," he added.
Rhode Island had the second biggest decline from the year before, with its jobless rate dropping to 9.1 percent from 10.6 percent in March 2012, followed by Florida, where the rate was 8.9 percent compared to 7.5 percent the year before.
In Idaho, Washington, Hawaii and Colorado, the jobless rates also were more than a percentage point lower than a year before.
Unlike previous downturns, the 2007-09 recession was fairly uniform, sparing only a few states. The recovery, though, began unevenly, with states rich in oil, natural gas and commodities pulling ahead and those where housing had been the major source of jobs limping for years after the real estate market collapsed.
Meanwhile, in March the Illinois jobless rate rose the most since March 2012, to 9.5 percent from 8.8 percent.
The state also had the second highest jobless rate in the country last month, followed by California and Mississippi, even as it added 36,000 jobs from the year before, according to its employment department.
"Economic uncertainty nationally and abroad dampened our country's job growth. When that happens, Illinois' share tends to be a negative number," said Jay Rowell, director of the employment department, in a statement.
"Monthly snapshots capture a moment in time. When those moments are evaluated together, we see progress away from a global recession and through a stubborn economic growth cycle," he added.
Indiana, Mississippi, New Hampshire, Pennsylvania, Delaware, North Dakota and Wisconsin also saw rate increases from March 2012. Meanwhile, the rates were unchanged in Alabama, New Mexico, and West Virginia.
NEW JERSEY'S UNEMPLOYMENT RATE TUMBLES
From February, the jobless rate increases were mild, with Louisiana seeing the biggest rise, to 6.2 percent from 6 percent.
Alaska, Florida, New Jersey, Rhode Island, Utah, Vermont, and Virginia experienced the largest decreases of 0.3 percentage points each.
New Jersey's unemployment rate drop in March to 9 percent was greeted as good news by the state's political leaders.
Last year, the jobless rate climbed steadily to the highest level in 35 years, 9.8 percent in July. Along with neighboring New York, New Jersey was the only state where the average jobless rate increased in 2012 from 2011. The signs of a slow recovery prompted New Jersey Governor Chris Christie to abandon claims that the state was in the middle of a comeback.
But now the rate has edged down and the state added 10,400 private sector jobs in March.
"Once again, jobs and unemployment are moving in the right directions, reflecting the growing strength in the state's economy," New Jersey's Chief Economist Charles Steindel said in a statement.
(Reporting by Lisa Lambert, additional reporting by Hilary Russ in Rutgers, New Jersey and by Tim Reid in Los Angeles; editing by Sofina Mirza-Reid and Chizu Nomiyama)