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A bit of good economic news – and the troubles it may show ahead

Dante Chinni

Posted: 12.15.2008 / 10:04 AM PST

The US economy is a complicated machine full of hundreds of pressure points and critical measures. Often its health is determined by a kind of group psychology – what people think is happening to it or where they think it is heading.

Patchwork Nation’s latest Economic Hardship Index shows the difficulty of measuring America’s economic health. On the whole, the numbers for December look better: The index score declined from November for every one of our 11 community types, and the average score dropped to 14.8 from last month’s 18.9. That’s the lowest number since August.

How is this possible when it seems everyone is on edge about 2009 and most are forecasting that the recession will last for at least a few more quarters, if not all next year?

There’s more to the numbers than meets the eye.

First, the index was created to watch short-term trends – month-to-month changes in unemployment, foreclosures, and gasoline prices. The short term has in fact seen some positives for Americans, particularly where the gas pump is concerned.

Across our 11 community types, gasoline prices fell dramatically in November – by 37 to 41 percent. That can put a decent amount of money back in people’s wallets. But the bad news is that oil prices are down because demand has been eased by the global recession, which many expect to deepen.

Second, the index scores have a few provisos, and they have troubling longer-term implications.

For instance, foreclosures worsened somewhat in seven of our 11 community types in October (the latest data available). That means increased hardship for those families ahead.

Foreclosures are still hitting Patchwork Nation’s growing and diversifying “Boom Towns” the hardest. These communities not only have the most foreclosures overall, but also the most per capita. The number of “Boom Towns” in Florida helps explain why that state has a dark-crimson hue (a high level of hardship) on our map.

But the foreclosure numbers also climbed in wealthy, largely suburban “Monied ’Burb” counties – a sign the crisis is starting to hit other areas that tend to be drivers of US consumer spending. Those places are still largely getting by all right – for instance, take a look at the East Coast – but growing foreclosure numbers there could signal tougher times ahead.

Another proviso has to do with unemployment. As a whole, the latest batch of unemployment numbers in the index was not completely awful. But it was still not encouraging.

In nine of our 11 community types, unemployment in October (again, the latest data available) ticked up by very small amounts – in the range of 0.1 to 0.3 percent. In the other two community types – our agricultural “Tractor Country” communities and our collegiate “Campus and Career” locales – unemployment was flat.

Yet the October numbers don’t take into account the layoffs that have taken place since then. They also don’t take into account layoffs that have been announced but not enacted. Patchwork Nation will be watching for which places and types of places get hit hardest next.

For now, the communities dealing with the toughest unemployment numbers are the constantly struggling “Minority Central” communities, which have large African-American populations.

As the new year approaches, it appears that overall, small-town “Service Worker Centers” are seeing the hardest times, with a hardship score of 18.

“Service Worker Centers” are often at the top of the Economic Hardship Index because they have lower-than-average median-household incomes and their somewhat rural locales mean more driving and higher costs for shipped goods. Gasoline prices play a big role here. In the December index, these communities have the highest gasoline prices in the United States by far. Their foreclosure and unemployment numbers are in the middle of the pack.

On the other end of the scale, the “Monied ’Burb” counties fare the best, with a score of 12.2. Unemployment edged up in these places, but it’s still low compared with other communities. And even though gasoline prices were a bit higher than average, they are still far below the highest price per gallon in the US. Moreover, higher household incomes and somewhat shorter commutes mean that gasoline prices matter less here.

As President-elect Obama’s team prepares to take office in January, this latest Economic Hardship Index reveals just how complicated the job ahead may be. In some places, hardship is about gasoline prices and the cost of living. In others, it is about mortgage payments, and in still others, it is about the looming threat of layoffs.

In other words, it’s not just about fixing the economy. It’s defining what “fixing” means.