US Fool Todd Wenning gives us his take on the state of the American economy.
The Great Recession in America is an incongruous tale, as the street-level effects of widespread job losses, home foreclosures, and struggling local governments really depends on where you happen to be standing in the country.
Here in Northern Virginia, where I'm based, unemployment remains well below the national average of 9.7% -- in Arlington County, it's just 4% and in the Fool's hometown of Alexandria, 4.8%.
The local housing market here has largely stabilized and Forbes magazine recently announced that six of the ten richest counties in the US are found in the Washington, DC metro area. Relatively speaking, our local economy is running quite well.
Meanwhile, states like Florida and Nevada, which thrived during the housing boom are now saddled with 11.9% and 13% unemployment, respectively. Michigan, once the hub of American manufacturing might, has the highest state unemployment rate of 14.3%. And those are just the official figures (they don't count those who've given up looking for work, for instance).
Two sides of a coin
No area of the country has escaped the recession altogether -- indeed, there are plenty of people in Northern Virginia who've been foreclosed upon or have lost their jobs -- but the stark inequality of suffering across the country means that the average national unemployment rate everyone reads in headlines is really more a meeting ground of two extremes than a uniform standard.
In fact, looking across the 372 official metropolitan area unemployment rates in the US, the average is 9.5% while the median is 8.9%, implying that unemployment pain felt in the upper-half of the cities is far worse than in the lower-half.
Hollywood nightmares
And perhaps no other state in the union has experienced more pain than California, where eight counties are experiencing 20%+ unemployment -- statewide, the rate is 13.2%.
Not only is California's unemployment rate fifth-highest in the country, but the foreclosure rate is fourth-highest, and it has the worst credit rating of any state in the union. Jamie Dimon, the CEO of JPMorgan Chase, said California's $20 billion (£13.1bn) budget gap might be a bigger default risk than Greece.
Compounding the problem is politics; California's state legislature requires a two-thirds supermajority vote to increase taxes or alter spending. State lawmakers are trying to pass an amendment to overturn the ridiculous supermajority rule, but in this hyper-sensitive political environment with federal mid-term elections coming in November, don't hold your breath.
This isn't at all encouraging for the greater US economy, given that California is its most populous state and its largest economy by far. The great force of the stand-alone Californian economy is often taken for granted as it's wrapped up in larger national statistics, but if California were its own country, its economy would rank eighth largest in the world.
Put simply, within the US, you have an economy the size of Canada with a credit rating of Greece up against the ropes.
What does this mean for UK investors?
As goes the local economies, so goes the overall US economy. If unemployment rates improve in populous, hard-hit states like California, Florida, and Michigan, the national rate will contract at a faster pace and paint a rosier picture. There are some tiny signs of improvement in these economies, but a strong recovery is still be a few years off.
Whilst the daily realities of the Great Recession vary county to county and state to state, the American economic recovery will continue to be slow. For owners of UK shares with significant exposure to the US, like Diageo (LSE: DGE), Pearson (LSE: PSON), and Carnival (LSE: CCL) and those with increasing US exposure, like Tesco (LSE: TSCO), it's important to remain patient with growth in the States. We still have a long way to go.
More from Todd Wenning:
> US Fool analyst Todd Wenning enjoys watching his dividends roll in. Todd does not own shares of any company mentioned. You can follow him on Twitter.
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