AP analysis: Average county was stressed in Jan.

[March 23, 2010]  LONDON (AP) -- Worsening economic conditions caused the nation to reach a bleak milestone in January: For the first time since The Associated Press began analyzing conditions in more than 3,100 U.S. counties nearly a year ago, the average county was found to be economically stressed.

Driving the pain was a deterioration in states that earlier had weathered the Great Recession better than the nation as a whole. These states endured the sharpest gains in unemployment for the past three months due to job losses in such industries as energy and construction. The states include West Virginia, Idaho, Mississippi, Montana and Wisconsin.

"What we're seeing is the state of West Virginia getting sucked into the same vortex that swallowed the national economy," said George Hammond, an economist at West Virginia University.

The AP's Economic Stress Index found the average county's score in January was 11.9. That was sharply higher than the 10.8 reading in December, the previous high.

The index calculates a score from 1 to 100 based on a county's unemployment, foreclosure and bankruptcy rates. A higher score indicates more stress. Under a rough rule of thumb, a county is considered stressed when its score exceeds 11.

More than 55 percent of counties were deemed stressed in January. That compares with less than 45 percent in December.

Though the nation's jobless rate fell to 9.7 percent in January from 10 percent in December, foreclosure rates didn't budge at 1.5 percent. That means 1.5 percent of households were in some stage of the foreclosure process. And the bankruptcy rate rose to 1.13 percent.

Nevada again endured the worst conditions of any state. Its Stress score in January was 21.57. Nevada was followed by Michigan (18.04), California (17.29), Florida (16.29) and Illinois (15.5). Stress scores for all five states rose from December.

North Dakota again was the least economically stressed state. Its score was 5.69. Next best were South Dakota (6.14), Nebraska (6.64), Vermont (8.03) and Hawaii (8.60).

The sharpest year-to-year increases in Stress scores in January were in Nevada, West Virginia, Illinois (15.5), New Mexico (10.23) and Alabama (14.05).

Early in the recession, which began in December 2007, strong demand and high prices for coal helped buoy West Virginia's economy. But conditions worsened as worldwide coal demand slackened. And construction jobs disappeared due to the housing bust in the once-booming eastern Panhandle, Hammond said.

West Virginia's Stress score hit 11.32 in December, up from 9.45 in December. Pushing up the score was a surge in lost jobs.

"Those job losses have been widely distributed across almost all sectors," Hammond said.

Early on, Mississippi, too, avoided the worst effects of the downturn because of rebuilding jobs from Hurricane Katrina and construction projects that were under way before the recession began. It also never experienced the housing bubble that triggered the downturn elsewhere. But in the past year, Mississippi lost more than 13 percent of its construction jobs.

Mississippi's Stress score jumped to 13.36 in January from 11.69 in the prior month, driven by higher unemployment.

"We were relatively late going into the recession," said Marianne Hill, an economist at the Mississippi Institutions of Higher Learning, the state university system. "We now seem to be catching up with the rest of the country in some ways."

Since peaking at 10.1 percent in October, the nation's unemployment rate dipped to 10 percent in November and December before falling to 9.7 percent in January and February. The widespread layoffs of a year ago have slowed. But many businesses still lack enough confidence to hire.

"The lack of hiring remains the No. 1 threat to the recovery," said Mark Zandi, chief economist at Moody's Economy.com.

Zandi and other economists predict the jobless rate will resume climbing in coming months. That will happen, in part, because people who had stopped looking for work out of frustration will re-enter the job market to resume their search.

Nariman Behravesh, chief economist at Global Insight IHS, a private forecasting firm, said: "What we are seeing is the unevenness of the recovery. Many sectors of the economy are still struggling."

High-tech manufacturing is managing to make a comeback, Behravesh said. But the housing slump has only leveled off, auto production is still weak and commercial real estate remains in a deep recession.

Counties in Kansas and South Dakota topped the list of least-stressed counties with populations of at least 25,000. Ford County, Kan. was the healthiest county with a Stress score of 4.17, followed by Ellis County, Kan. (4.31), Brookings County, S.D. (4.59), Brown County, S.D. (4.84) and Finney County, Kan. (4.86).

California counties dominated the list of most-stressed counties. Imperial County, Calif., was again the most stressed county with a score of 31.34. It was followed by Merced County, Calif. (28.09), Lyon County, Nev. (27.91), San Benito County, Calif. (26.58) and Yuba County, Calif. (25.47).

[Associated Press; By MIKE SCHNEIDER and MARTIN CRUTSINGER]

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