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Signs of life in the auto industry and an easing of the housing crisis helped reduce unemployment and kept foreclosures flat in some of the nation's hardest-hit areas in July, 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 showed joblessness dipped in counties where temporarily closed auto-related plants resumed production in July. Foreclosure rates, meanwhile, slowed in the Sun Belt epicenters of the housing bust. Bankruptcy rates, which respond more slowly to economic shifts, rose slightly.
The average county's stress score dipped to 10.54 in July, from 10.6 in June. In July 2008, it was 6.94.
The AP calculates a score from 1 to 100 based on a 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 exceeds 11. In July, 41 percent of counties had stress scores of 11 or higher, the same as in June. A year earlier, only
7.3 percent of counties had scores of 11 or higher.
The five counties with 25,000 or more residents that showed the most improvement from June to July had a heavy presence of auto-related manufacturers: Howard and Miami counties in Indiana, Giles and Warren counties in Tennessee and Tuscaloosa County, Ala.
Auto companies boosted production mainly to replenish depleted inventories. General Motors Corp. and Chrysler LLC restored shifts and reopened factories as the companies restructured and emerged from bankruptcy protection.
The industry also benefited from the government's now-ended Cash for Clunkers program. It provided rebates of up to $4,500 for consumers who traded in gas-guzzling older cars for newer, more fuel-efficient models. The program contributed to a 2.4 percent jump in July auto sales and a 30 percent increase in August.
All three U.S. automakers, along with Toyota and other overseas companies, ramped up production in response to the clunkers program. GM is rehiring more than 1,300 laid-off workers. Ford Motor Co. said it would expand production by 33 percent in the fourth quarter over last year's levels.
Chrysler reopened plants in Howard County, Ind., that employ about 4,000. Howard benefited from the most improved stress score from June to July, dropping from 23.17 to 18.18. Its jobless rate fell to 14.7 percent from
19.7 percent in June.
"It's nice to see those parking lots refilled," said Jeb Conrad, president of a local economic development group.
The county is also home to a Delphi Corp. auto parts plant that GM has agreed to take over while Delphi struggles to emerge from bankruptcy protection.
Conrad also said Delphi recently received $89 million in federal stimulus money to research electric vehicle technologies.
In Warren County, Tenn., between Nashville and Chattanooga, tire-maker Bridgestone returned to full production in July after furloughing workers for part of June. Auto parts supplier Yorozu Automotive, the county's second-largest manufacturer after Bridgestone, began producing a new line of products. That helped drop the county's jobless rate to 13.5 percent from 16 percent in June.
Money from the Obama administration's $787 billion stimulus package also helped fund road and bridge projects that are employing previously jobless contractors, said Jeff McCormick, the county's director of economic development.
"Nobody is busting the doors down, but it seems like there is a little bit more optimism," McCormick said.
Tuscaloosa, Ala., saw its stress index drop to 12.47 from 14.83 in June, the second-best improvement of all U.S. counties. Mercedes-Benz builds SUVs at a plant in Tuscaloosa that employs about 3,000. The plant had shut down after Memorial Day then reopened in late June, company spokeswoman Felyicia Jerald said.
"If you drive through, it doesn't feel like we're in a recession," he said. "But the numbers still tell me we've got a way to go to recovery in the automotive sector."
The most stressed counties in July with populations over 25,000 were Imperial County, Calif. (33.37); Yuma County, Ariz. (27.69); Merced County, Calif. (25.24); Lyon County, Nev. (23.92); and Yuba County, Calif. (23.7). Imperial and Yuma also had the nation's highest jobless rates (30.2 percent and 26.2 percent, respectively).
Lyon and Merced counties were in the top five for highest foreclosure rates (8.6 percent and 7.8 percent, respectively).
For a second straight month, Nevada, Michigan and California suffered the most economic distress, with Stress scores of 20.86, 18.3 and 16.3, respectively. North Dakota, South Dakota and Nebraska showed the least distress, with scores of 4.54, 5.27 and 6.17, respectively.
Meanwhile, the foreclosure rate nationwide dipped to 1.49 percent in July, down from 1.51 percent in June, compared with 1.29 percent in July 2008. Growth in foreclosures slowed from June to July in the worst-hit states of Arizona, California and Florida. It fell slightly in Nevada, from 7.4 percent to 7.1 percent.
But Robert Edelstein, a real estate professor at the University of California, Berkeley, warned that foreclosures could rise again, especially after the effect of stimulus spending fades. He especially worries about commercial real estate foreclosures.
"There is some positive [economic] news, but all of [it] has a very lackluster underbelly," Edelstein said. "Any shocks to the system could lead us back down a dark avenue."
