The economic recovery is proceeding unevenly in its early stages, with areas hurt most by the housing slump still lagging behind other regions, according to The Associated Press' monthly analysis of economic stress in more than 3,100 U.S. counties.
Counties in the Southeast, the industrial Midwest and the Southwest are still struggling and have made the least improvement, the analysis of September data found. The northern half of the nation is stabilizing or improving faster than the southern half. Northern counties generally didn't suffer as much from the housing bust.
The government said last week that the U.S. economy grew at a 3.5 percent annual rate in the third quarter, ending four straight quarters of decline. But that growth is expected to slow as government stimulus programs wind down.
The AP's Economic Stress Index calculates a score from 1 to 100 based on a county's unemployment, foreclosure and bankruptcy rates. Under a rough rule of thumb, a county is considered stressed when its score exceeds 11.
Nationwide, the average county's Stress score dipped to 10.1 in September from 10.3 in August, helped by a steadying of foreclosure and bankruptcy rates. In September 2008, the average county Stress score was much lower: 6.73.
The highest Stress scores were still found mainly in states that endured housing booms and busts. Nevada had the highest score, 21.95, followed by Michigan, with its battered auto industry, at 17.75. California was next, at 16.2, followed by Florida, 15.4, and Arizona, 14.26.
States with the lowest Stress scores in September were North Dakota (4.07), South Dakota (5.01), Nebraska (5.71), Montana (6.6) and Wyoming (6.9).
"Housing still is at the epicenter of this crisis around the country, and places where the cycle was most egregious are also now places that are seeing some of the highest rates of unemployment,'' said Sean Snaith, an economist at the University of Central Florida.
Midwestern and Plains states such as Oklahoma, Nebraska, North Dakota and Iowa avoided the worst of the housing and financial crises. And Oklahoma and North Dakota have recently benefited from rising oil prices. The region also has been helped by a weaker dollar, which has made agricultural commodities cheaper for foreigners to buy.
Areas of the Northeast, such as Pennsylvania and upstate New York, are benefiting from economically stable industries like higher education and health care. Those are the two industries that have added jobs during the recession.
Pittsburgh, for example, is no longer an old-line industrial city. The city's largest employers are the University of Pittsburgh's Health Center and the West Penn Allegheny Health System, a network of hospitals, noted Steve Cochrane, an economist at Moody's Economy.com.
That's in contrast to much of neighboring Ohio, which still has auto-related manufacturing that has been hit hard by the downturn, Cochrane said. In September, Ohio suffered from a Stress score of 12.48, while Pennsylvania's was only 9.49.
About 36 percent of counties in September had a score of 11 or higher, down from 39 percent of counties in August. Twenty-nine states saw some improvement in their Stress scores from August to September.
Since the start of 2009, 12 states have improved their Stress scores: Alaska, Arkansas, Colorado, Indiana, Maine, Minnesota, Mississippi, Montana, Nebraska, North Dakota, South Dakota and Vermont.
The contrast between stabilizing regions and worsening ones can be seen in the economies of Arkansas and Florida. Arkansas didn't bear the brunt of the recession until the financial markets collapsed last fall. Its unemployment rate rose from 5.2 percent in September 2008 to 7.1 percent last month. And its Stress score rose from 6.48 to 8.84 in the past year.
But its economy has begun showing signs of life. Arkansas' economy has been stable since March, with some job gains in September. Job creation is expected in the first quarter of next year.
"I think Arkansas will emerge stronger than our neighbors and a little bit ahead of the curve,'' said Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock.
Arkansas also is home to several industries that fared well during the recession. Wal-Mart and its suppliers anchor the northwest part of the state. Food processing plants in the northeast part of the state are humming, and health service jobs in Little Rock have increased.
Florida, by contrast, was severely hurt by the housing bust. Its unemployment rate started climbing months before the official start of the recession in December 2007, from 4 percent in June 2007 to 11 percent in September. Its jobless rate is expected to remain above 10 percent into 2012.
"I'm expecting Florida to lag the nation as a whole in the recovery,'' Snaith said. "A lot of that is just trying to get out from under the burden of the housing market.''
Three of the five-most-stressed counties with populations over 25,000 were in Nevada, also battered by the housing crisis. The five are: Imperial County, Calif. (33.51); Yuma County, Ariz. (25.82); Lyon County, Nev. (24.72); Clark County, Nev. (23.83); and Nye County, Nev. (23.72).
"There is going to be a longer process for those economies to get back into the swing of things,'' Pakko said.