Economy bad all over — even before crisis

New census data shows that throughout the first half of the decade, the slumping economy touched nearly every U.S. community. Incomes dropped while poverty and unemployment rose in the vast majority of the nation’s cities and towns.

Small and medium-sized cities in the Midwest, already suffering from an ailing auto industry, were hit the hardest, with unemployment rates doubling or tripling in communities throughout Michigan, Ohio, Indiana and Illinois.

The numbers weren’t as bad in other parts of country, 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.

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.

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