The recession, so economists say, is over. The recovery may be slow, but it is underway. Unemployment will drop slowly through the next few years and may fall under 9% in 2011. The real estate market will eventually recover some part of its losses.

Many polls show that most American citizens believe that the recession did not end. They look at their jobs prospects and underwater home loans and believe the recovery is far off.

There are some regions of the US where the recovery may not be far off. It may not happen at all. These are cities where unemployment is as high as 30% at the worst and 15% at the best. Most are in parts of America hit hardest by housing. The construction industry in these parts of the country has collapsed. People cannot sell their home without paying 50% or more of their face value compared to their mortgages to the bank. The means these home owners are faced with default.

Many of the worst-hit cities are not surprisingly are in California, according to July unemployment statistics. Some such as Stockton, California’s 13th largest city, are relatively large. Stockton has an unemployment rate of 17.4 percent.  These struggling cities will have difficulty recovering from the slowdown.

El Centro, CA has 77,000 people and 30% of those who can work are out of work. Yuma, Arizona has a population of 93,000 and 28.7% of the working population is unemployed. Yuba City, CA has a population of 72,000 and 19% of those who can work are unemployed. Merced, CA. with a population of 107,000, 18.9% of the workforce is jobless.

What is at issue now is what becomes of these cities. State government cannot afford to underwrite the drops in their tax bases. City employee pension plans are likely to default. Basic social services like police and fire departments will be cut to the bone. Those people who can leave, will.

Economic circumstances may force these towns into filing for the equivalent of Chapter 11  because they are no longer habitable except by their poorest residents.

The rest of the country will recover economically–eventually.  Some small part of America cannot recover at all.

Douglas A. McIntyre

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