Cities where poverty is soaring

24/7 Wall St.

Despite signs of economic recovery, the number of U.S. residents living in poverty remains stubbornly high. An average of 15.7% of the U.S. population lived below the poverty line during the three-year period of 2010-2012, a considerable increase from an average of 13.6% during the previous three-year period of 2007-2009.

In some of the nation’s smaller cities, poverty is an even more severe problem. In Eastpointe, Michigan, the poverty rate rose from 12.2% during 2007-2009, slightly below the U.S. average rate, to a 27.1% average rate during 2010-2012. According to the latest data provided by the U.S. Census Bureau, the poverty rate in more than 20 cities with populations of 25,000 or more increased by at least 10 percentage points between those two three-year periods. 24/7 Wall St. examined the 10 cities with the biggest increases in poverty rates.

Yahoo Homes is publishing the top five cities where poverty is soaring. To see the rest of the top 10, go to 247WallSt.com:

Many of these cities show a symptom of the regions hit hardest by the recession — a significant decline in real estate value. Nationally, the average home value during the three-year period of 2010-2012 was down by 9% compared to the previous three-year period. In eight of the 10 cities with soaring poverty rates, property values fell by at least 10%. Homes in Eastpointe lost nearly half of their value. In Inkster, Michigan, another city where poverty grew substantially, an average of 43.3% of homes were worth less than $50,000 between 2010 and 2012, compared to just 11.8% of homes during the 2007-2009 period.

Job losses also hit these cities hard. Nationally, unemployment rose from 4.6% in 2007 to 8.1% last year. In the majority of these cities, unemployment increased, and remained above the national rate. In North Chicago, which had one of the largest increases in poverty, unemployment rose from 10.5% in 2007 to 15.4% in 2012.

Because the housing crash was a major factor in the recession, construction was one the industries hurt most. Between 2007 and 2012, national construction employment fell by 26%, or nearly 2 million jobs. Many of the cities with the biggest increases in poverty saw a similar decline in construction employment. In Cookeville, Tennessee, which had the second-largest increase in poverty in the country, nearly 10% of the workforce was employed in the industry between 2007 and 2009, compared to just 5.6% on average between 2010 and 2012.

Several of these cities were already struggling prior to the recession, in part because of their reliance on manufacturing. The industry had been declining for years, and the recession only made matters worse. In Salisbury, North Carolina, employment in manufacturing fell from 15.5% of all jobs to 8.3%. Goshen, Indiana, another city with a major increase in poverty, is heavily dependent on the auto industry — more than a third of the working population was employed in manufacturing between 2010 and 2012. According to Joe Frank at the Indiana Department of Workforce Development, this dependence had particularly dire consequences during the recession.

Local governments in these cities with rising poverty rates are struggling to cope with their area’s declining prosperity. In North Chicago, which had a 12.3 percentage point increase in poverty, the school district is struggling with the threat of bankruptcy. Earlier this year, the Inkster, Michigan, school district was dissolved because of declining enrollment and increasing budgetdeficits. Revenues in Eastpointe, which is suffering from a declining population and property values, have plummeted, and city officials have proposed additional taxes to keep the city out of a state of fiscal emergency.

To identify the cities with the biggest increases in poverty, 24/7 Wall St. reviewed the U.S. Census Bureau’s American Community Survey 2012 three-year estimates. Because this release averages three years worth of data (2010-2012) it allows for the review of smaller cities. Checking the Census Bureau’s comparison table for statistical significance, we compared this three-year period to the 2007-2009 period. The cities with populations of 25,000 or more with the largest percentage point increase in poverty made our list. To be consistent, we used three-year averages for national figures as well. In addition to poverty figures, we collected home values, income, and employment by industry, all using the ACS. From the U.S. Bureau of Labor Statistics, we reviewed annual average unemployment figures from the past six full years.

5. Salisbury, N.C.
> Poverty increase: 12.4 ppt
> 2010-2012 Poverty rate: 28.4%
> Median household income: $33,083
> Population: 33,596

During the three-year period ending in 2009, Salisbury’s poverty rate of 16% was about 3% higher than the national rate. In the following three-year period between 2010 and 2012, the city’s poverty rate was approaching 30%. Salisbury has traditionally relied heavily on the manufacturing sector, particularly textiles and fabrics. In recent decades, however, manufacturing activity has declined significantly and continues to do so. Between 2010 and 2012, manufacturing jobs in Salisbury — as a percent of the workforce — shrank from 15.5% to 8.3%.

4. College Park, Md.
> Poverty increase: 13.0 ppt
> 2010-2012 Poverty rate: 32.0%
> Median household income: $53,913
> Population: 30,921

Five years ago, households in College Park were among the wealthier in the U.S. By the end of last year, however, earnings in just a handful of cities declined more than they did in College Park. The typical household in College Park city earned $53,913 on average between 2010 and 2012, $17,387 less than a typical household made between 2007 and 2009. In every year between 2007 and 2012, unemployment in College Park city was below the national rate. As of August of this year, however, the unemployment rate in the region was 7.8%, more than the U.S. rate of 7.3%.

3. Goshen, Ind.
> Poverty increase: 13.3 ppt
> 2010-2012 Poverty rate: 27.0%
> Median household income: $38,155
> Population: 31,989

Between 2007 and 2012, unemployment in Goshen, Indiana, doubled from 4.5% to 9%. Extreme poverty in the area also shot up considerably. During the 2007-2009 period, 4.5% of households earned less than $10,000 per year. This was less than the nationwide proportion of 5.7% of households. By the 2010-2012 period, the figure increased to 13.5% of homes, compared to 7.5% nationally. According to Joe Frank at the Indiana Department of Workforce Development, the economy of Goshen relies very heavily on manufacturing. “When the worst of the recent recession hit, Elkhart County was one of the most affected counties in the US due to this reliance.” In the 2010-2012 period, 33.7% of the area’s workforce was employed in the manufacturing sector, the third-highest proportion in the country.

2. Cookeville, Tenn.
> Poverty increase: 13.4 ppt
> 2010-2012 Poverty rate: 35.2%
> Median household income: $28,212
> Population: 30,755

Cookeville, Tennessee’s average poverty rate during the 2007-2009 period was 21.8%, significantly higher than the U.S. rate of 13.6% at that time. Between 2010 and 2012, the poverty rate jumped to 35.2%, or nearly 20 percentage points above the national rate. During that period, the proportion of homes earning extremely little — with incomes of less than $10,000 — increased from 4.3% to 16%, the 19th-highest proportion among cities with populations of 25,000 or more. Like many of the cities with rising poverty, construction employment declined significantly, from 9.8% between 2007 and 2009 to 5.6% over the three-year period ending in 2012.

1. Eastpointe, Mich.
> Poverty increase: 14.9 ppt
> 2010-2012 Poverty rate: 27.1%
> Median household income: $36,706
> Population: 32,412

In recent years, property values in Eastpointe have plummeted. Between the three-year period ending in 2009 and the three-year period ending in 2012, the median home value declined by nearly 50%. Such dramatic losses in value are often linked to a shrinking population and a difficult job market. This is the case in Eastpointe as well. According to the Detroit News, Eastpointe’s population has fallen, its budget has shrunk by millions, and state funding declined by $700,000 since 2009. In addition to cost-cutting measures such as eliminating full-time employees and closing city offices on Fridays, city residents will be asked to pay more property taxes next year to balance the budget. This may be difficult for Eastpointe residents, whose median household income of $36,706 a year between 2010 and 2012 was considerably lower than the average national income.

Click here to see the rest of the 10 cities where poverty is soaring on 247WallSt.com.

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