FORTUNE – All eyes on Wall Street are fixated on today’s report on the state of the jobs market. Like previous reports, the figures underscore what we already know: The U.S. Economy is still in the middle of a slow recovery. The economy added 157,000 jobs in January and the unemployment rate ticked up to 7.9%.
But it’s important to look at what’s been happening in some of the most troubled states during the past year, and where the unemployment story matters most if we’re to see the housing market continue improving.
Nevada, Florida, Arizona, Georgia and Michigan have continued to struggle with millions of borrowers who owe more on their mortgages than their homes are worth. Together, they make up 24% of the nation’s total amount of negative home equity, according to data from CoreLogic.
Demand for housing can only rebound in earnest when new jobs are created in those areas. While the job markets in these five states states have improved some over the past year, as of December all but Florida and Arizona had unemployment rates significantly higher than the national average. The state-by-state unemployment data for January will be released later this month.
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Of all home loans in Nevada, 59.5% were underwater as of the third quarter of 2012. Nationally, just 22% of home mortgages were still underwater at that time. Home prices in Nevada rose 14% in November compared with a year earlier, but it remains to be seen if the upward trend will continue. As of December, Nevada’s unemployment rate was still disturbingly high at 10.2% compared with 13% a year earlier.
Though not quite as bad, Georgia is in a similar boat where 35.6% of all mortgages are underwater. The unemployment rate was 8.6% in December, lower than 9.4% a year earlier but that’s still higher than what’s played out nationally during those periods.
Michigan also deserves attention. Of all home loans, 32% are underwater as the state struggles with a far worse jobless picture than the rest of the country with an unemployment rate of 8.9% as of December.
Florida and Arizona’s jobless situation is roughly in line with the rest of the country. But that doesn’t say much, given that both states have among the highest shares of borrowers with troubled home loans. As of December, Florida’s unemployment rate was 8%, while Arizona trailed behind at 7.9%.
So in the year ahead, how much unemployment falls will matter most where borrowers are most distressed.