Cycle of rising unemployment, foreclosures and bankruptcies raising economic stress

AP analysis: Economic stress up in much of nation
Cycle of rising unemployment, foreclosures and bankruptcies raising economic stress

(Source AP) California, Michigan and South Carolina suffered the most financial pain in May as unemployment, home foreclosures and bankruptcies rose, according to The Associated Press' monthly analysis of economic stress in more than 3,100 U.S. counties.

The latest results of the AP's Economic Stress Index show the worst financial crisis since the 1930s causing lingering damage even as other signs suggest the recession is winding down.
The average county's Stress score, fueled by worsening unemployment, foreclosures and bankruptcies, rose to 10 in May, from 9.7 in April.

In May 2008, the average Stress score was 6.2. The pain was lower then because the economy was still expanding. In fact, the second quarter of 2008 was the last time the economy grew.

The AP calculates a score from 1 to 100 based on each county's unemployment, foreclosure and bankruptcy rates. The higher the score, the higher the economic stress.

Under a rough rule of thumb, a county is considered stressed when its score zooms past 11. In May, 36 percent of the counties scored 11 or higher, up from 34 percent in April. But the latest reading was slightly better than February and March, when nearly 40 percent of counties were at or above that threshold.

Federal Reserve Chairman Ben Bernanke and many other economists predict the recession will end later this year. Even if it does, unemployment, foreclosures and bankruptcies are likely to keep climbing and cause further harm in many communities, economists predicted.

"The pain will linger well after the recession is over, making for a subdued economic recovery," said Richard Yamarone, economist at Argus Research.

Many economists say the recession eased from April to June and that the economy might start growing again as soon as the current July-to-September quarter.

Among states, California, Michigan and South Carolina showed the most economic stress in May, with their counties' scores averaging 16, 15.9 and 15, respectively, the AP analysis shows.
California has been battered by the housing bust, and Michigan has absorbed the brunt of the auto industry crisis.
"And South Carolina is a little bit of everything," said Sean Snaith, economics professor at the University of Central Florida. "Manufacturing and construction jobs have been hard hit in the state."
One common thread running through all three states is heavy jobs losses. Rising unemployment, in turn, is escalating foreclosures and bankruptcies.
The rising economic stress comes as California, saddled with a whopping $24.3 billion budget deficit, and other states are scrambling to cope with fiscal crises. Read More...
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