First Posted: Sep 21, 2012 02:28 PM EDT

U.S. President Barack Obama delivers remarks at a campaign rally in Woodbridge, Virginia, September 21, 2012. (Photo : REUTERS/Jason Reed)

The unemployment rate rose last month in some states considered key to the U.S. presidential election, including Iowa and Nevada, data from the Labor Department showed on Friday.

Overall, unemployment rates were mixed in states across the nation. Jobless rates rose in 26 states in August from July, fell in 12 states and the District of Columbia, and was unchanged in another 12 states.

Compared with last year, jobless rates fell in 42 states, rose in seven and remained the same in one.

Because of the unique U.S. political system where states cast electoral votes for president, the contest between President Barack Obama and Republican candidate Mitt Romney is heating up in some states where polling suggests voters are undecided.

Sluggish economic growth and high unemployment has been a focal point of the campaigns ahead of the election in November.

Of the eight states where the polls are currently tight, half had unemployment rates above the national average of 8.1 percent.

Although the overall labor market is better off than it was a year ago, it appears to be losing momentum, said Chris Jones, economist at TD Bank Group.

"We've entered into a phase where are improvements are slowing down," said Jones.

Nevada, considered one of the battlegrounds of the election, had the highest unemployment rate in the country of 12.1 percent, up from 12 percent in July.

The jobless rate rose in other swing states, too, with North Carolina climbing to 9.7 percent, and New Hampshire up at 5.7 percent.

Florida, Ohio and Virginia all held steady, while Colorado eased to 8.2 percent from 8.3 percent.

Rounding out the top three highest states behind Nevada were Rhode Island and California, both with jobless rates above 10 percent. Michigan, which was hard hit by the housing market collapse and recession, saw its unemployment jump to 9.4 percent from 9 percent.

On the flip side, North Dakota had the lowest jobless rate at just 3 percent.

While Midwest states are benefiting from a boom in natural resources, coastal states such as Florida and California are still coping with the fallout of the housing crisis and lost construction jobs, said TD Bank Group's Jones.

States have also been hit by tight budgets and uncertainty over the bundle of government spending cuts and tax hikes that are set to take place at the beginning of next year, Jones said.

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