Indiana's unemployment rate leapt to 8.2 percent in December from 7.1 percent the month before, tying it with South Carolina for the largest rate increase in the nation.

Manufacturing and construction led the way in job losses in Indiana, with 18,700 jobs lost in those two sectors alone, a U.S. Bureau of Labor Statistics report released Tuesday shows.

"If you look at it, two very important industries in Indiana, they have done extremely bad in the last few months, and those are steel and automobiles," said Don Coffin, a professor of economics at Indiana University Northwest in Gary.

Automobile sales nationwide in the last three months of the year were down 35 percent to 40 percent, Coffin said. Domestic steel production dropped about 50 percent compared to one year ago.

In Illinois, the unemployment rate rose to 7.6 percent in December from 7.3 percent in November, the bureau's Regional and State Employment and Unemployment report shows.

For most of this recession, Indiana Department of Workforce Development officials have been able to boast that Indiana's unemployment rate remained lower than that in neighboring states. That is no longer true.

Of the four neighboring states, only Michigan had a higher December unemployment rate at 10.6 percent.

Construction activity held up well in Indiana for most of 2008, Coffin said. But given the nationwide weakness in construction, a large loss in jobs in the field was sure to hit Indiana sooner or later.

Indiana lost 8,800 construction jobs in December, and Illinois lost 13,400.

Overall, Indiana lost 35,300 jobs during the month and Illinois lost 36,000 jobs. Those were among some of the heaviest state job losses in the nation.