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Unemployment decreased in 36 U.S. states in November, with Kentucky and Connecticut posting the biggest declines from a month earlier.

Kentucky’s jobless rate dropped to 10.6 percent from 11.3 percent the previous month, the Labor Department said today in Washington. Unemployment in Connecticut dropped to 8.2 percent last month from 8.8 percent. More states reported reductions in payrolls than increases during November.

Unemployment close to a 26-year high is a blow to states, whose budgets have been strained by the recession that started two years ago, as tax revenue slows and more is paid out in jobless benefits. The U.S. unemployment rate is forecast to exceed 10 percent through June, limiting consumer spending as the economy recovers.

“The weakness in the labor market is certainly a negative for state budgets and state tax collections,” said Alex Miron, an economist at Moody’s Economy.com in West Chester, Pennsylvania. “The rate of decline in employment is much, much lower than it was earlier in the year. The fact that it’s no longer falling rapidly is a positive sign.”

South Carolina and Florida registered jobless rates in November that were the highest since data began in 1976.

The number of states with at least 10 percent unemployment stayed at 14 last month. The jobless rate in the U.S. fell to 10 percent in November from 10.2 percent, the Labor Department said Dec. 4.

Federal Reserve

A lack of job creation was one reason Federal Reserve policy makers this week said they will keep their benchmark interest rate low for an “extended period.”

Payrolls declined by 11,000 in November, the smallest drop since the start of the recession in December 2007. The U.S. economy has lost 7.2 million jobs during the downturn, the most of any slowdown in the post-World War II era.

“The deterioration in the labor market is abating,” central bankers said in their Dec. 16 statement after voting to hold interest rates close to zero. Consumer spending “remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.”

Michigan continued to lead the nation in joblessness, with a rate of 14.7 percent in November, down from 15.1 percent.

New York City’s unemployment rate slipped to 10 percent from 10.3 percent in October, the state’s Labor Department reported yesterday low interest personal loan. The state’s jobless level fell to 8.6 percent from 9 percent.

New Jersey’s rate held at 9.7 percent, the state’s Labor Department said Dec. 16.

Louisiana, Nevada

The jobless rate in Louisiana dropped by 0.7 percentage point to 6.7 percent, and Nevada’s fell by 0.6 percentage point to 12.3 percent. The Labor Department said it does not consider those declines statistically significant because of higher margins of error when estimating unemployment in those states.

Payrolls fell last month in 31 states and the District of Columbia, while 19 reported increases, today’s report showed. Florida showed the biggest drop with a 16,700 decrease, while Texas led payroll increases with 17,300.

The U.S. House this week passed legislation that would expand unemployment benefits and give state and local governments that are struggling with slow tax revenue funds to prevent them from having to fire employees.

The jobs bill won’t be debated by the Senate until next year, and it faces opposition from lawmakers concerned about its effect on the budget deficit.

“I feel confident, and at the same time, I feel afraid of what’s ahead,” said Jason Walsh, 23, from Fairfield, Connecticut, who lost his job as a pesticide applicator this month. “The economic isn’t good and I see everything declining, but in the same way, it’s getting a little bit better.”

Reynolds Tobacco

Companies trimming payrolls include Reynolds American Inc. The second-largest U.S. tobacco company, based in Winston-Salem, North Carolina, said this week it plans to cut 400 jobs in its cigarette division, R.J. Reynolds Tobacco Co.

Some companies are recalling staff. Peoria, Illinois-based Caterpillar Inc., the world’s largest maker of bulldozers and excavators, said it expects to bring back some dismissed workers next year as sales improve.

“We’ll gradually begin to call people back and to rebuild our overall sales and ability to ship product,” Chief Executive Officer Jim Owens, 63, said in a Dec. 11 interview with Bloomberg Television. “I think it will gradually begin to pick up as 2010 unfolds.”

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