Census: U.S. In Economic Slump For Years

The Federal Reserve has lowered its projection for economic growth this year, spurring fears that the economy could continue to weaken despite January's interest rate cuts, Wednesday, Feb. 20, 2008. (AP / CBS)
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(CBS/ AP) It's not news to small-town Milledgeville, Ga. - population 20,000 - that the United States is now in a recession. Almost 1,000 people lost their jobs in the last few months after a major air conditioning plant moved most of its production to Mexico, reports CBS News correspondent Kelly Wallace.

"When you lose $15 dollar an hour jobs and then have to find a new job paying $7, 8 or 9, that hurts," says Milledgeville's mayor.

And they've been hurting for years, according to new census data. One-in-three residents, about 7,000 people, has been living in poverty since 2005, according to the latest census figures, compared to one-in-four in 2000.

And all across America, similar figures provide a dismal economic snapshot of recent years - out of 2,000 cities surveyed, 70 percent saw hikes in poverty and 71 percent saw increases in unemployment.

Small and mid-sized towns in the industrial Midwest have been hit the hardest, Wallace reports, because of the ailing auto industry, with unemployment doubling or tripling in communities throughout Michigan, Ohio, Indiana and Illinois.

What's going to happen with these small and mid-sized cities if the trend continues when it comes to unemployment and poverty?

"Well, the immigrant labor force may be the saving grace for these small towns," says Mitchell Moss a professor of urban planning at New York University. "The immigrants actually may be the one group that comes into those places and eventually starts their own businesses."

Things really are bad all over - and they had gone bad even before the housing and finance industries crashed and sent the economy into a tailspin.

The latest data shows that throughout the first half of the decade, the slumping economy touched nearly every community in the country. Incomes dropped while poverty and unemployment rose in the vast majority of the nation's cities and towns.

The numbers weren't as bad in other parts of country, as in the Midwest, but no region was spared, with incomes dropping as home prices escalated. The result: an unsustainable housing market that ultimately fueled the current economic crisis.

"For a while we were on a binge of living beyond our means," said David Wyss, chief economist at Standard and Poor's, the credit rating service. "We were financing our spending habits by treating houses like giant ATMs."

The data, which is being released Tuesday, is the first detailed economic, social and demographic information for small- and medium-sized cities since the 2000 census. It was collected over three years, from 2005 through 2007, providing a mid-decade snapshot of every community with at least 20,000 residents.

In North Dakota, Bismarck, Fargo, West Fargo, Grand Forks and Minot were surveyed, but before the effects of the state's latest surge in oil development set in.

The census figures show income dropped in all cities but Minot and West Fargo while unemployment dropped everywhere but Fargo. Poverty rose in all cities surveyed except Minot, the figures showed.

The data comes from the American Community Survey. Census takers interview 3 million households a year for the survey, which produces annual data for geographical areas with populations of 65,000 or more. For areas with at least 20,000 people, the survey produces three-year averages.

The new numbers explain why the housing bubble burst and why the economy was such a big issue in this year's presidential campaign. They also explain why voters soured so much on President George W. Bush's handling of the economy, even before the current financial crisis.

The years covered by the report include the housing market at its peak. Incomes had started to rise while poverty and unemployment rates had begun to fall, following the recession earlier in the decade.

But in the vast majority of America's cities and towns, economic conditions never fully reached the prosperity that marked the beginning of the decade.

The Associated Press analyzed economic data from the 2,000 or so cities and towns across the nation with populations of 20,000 or more, comparing the 2005-2007 data to figures from the 2000 census.

Among the findings:

Median household income dropped in 79 percent of the cities and towns. Incomes dropped in the wealthiest communities as well as the poorest. Charleston, Ill., home to Eastern Illinois University, saw the biggest drop - 31 percent - to a median household income of just under $21,000.

Nationally, incomes dropped by 4.3 percent during the period, to $50,007.

The poverty rate increased in 70 percent of the cities and towns. Athens, Ohio, home to Ohio University, had the highest poverty rate, at 52.3 percent, in the 2005-2007 period.

Nationally, the poverty rate increased from 12.4 percent to 13.3 percent since the start of the decade.

The unemployment rate increased in 71 percent of the cities and towns. Muskegon, Mich., a city of about 40,000 near Lake Michigan, had the highest unemployment rate, at 22.1 percent.

Nationally, the unemployment rate increased from about 4 percent in 2000 to 6.6 percent in the 2005-2007 period.

Median home values increased in 92 percent of the cities and towns studied - doubling and tripling in many cities, mainly in California. Nationally, the median home value increased 26 percent, to $181,800.

It's not surprising that many communities were doing better in 2000 than they were mid-decade, said Scott Hoyt, senior director of consumer economics at Moody's Economy.com.

"The year 2000 was at the end of an incredible boom that lasted a decade," Hoyt said.

Incomes were up, unemployment was down and the dot-com bubble had not yet burst on Wall Street.

"We just didn't have enough years of expansion" this decade, he said.

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