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How Do You Calculate Patchwork Nation's Hardship Index?

June 5, 2009

Patchwork Nation's hardship index captures recent economic changes as well as current economic conditions in individual counties based on a series of data indicators.

The hardship index is calculated based on six pieces of data at the county level:

• Gas prices in the previous month

• The change in gas prices from two months ago to the previous month

• An estimate of the percentage of monthly household spending dedicated to fuel consumption and car maintenance

• The unemployment rate from two months ago

• Home foreclosures per 1,000 homes in the previous month

• Change in home foreclosures per 1,000 homes from two months ago to the previous month.

These figures are standardized and made into an index, which is then calculated to run from 0-100, with 100 indicating the county with the highest hardship score for that month, and 0 indicating the county with the lowest hardship score.

Usually we present an index of relative hardship running from 0 to 100, as described above, rather than presenting a gauge of the absolute level of hardship, which presents another analysis of the six indicators. In the absolute index, higher values indicate harsher conditions though the index numbers have no literal meaning.

We use relative hardship on the county pages of Patchwork Nation to identify where the locations are each month that, based on the data available, are experiencing the most vs. the least economic difficulty based on these particular indicators. Note that on the relative index it is possible that a score of 100 in one month could be worse or better than a score of 100 in another month.

The absolute index is used to get a sense of the absolute level of economic difficulty a location experiences, which may fluctuate from month to month as conditions worsen or improve. This index simply sums the standardized scores for each indicator, but does not rescale them. For closer scrutiny, users may want to examine the components of the index separately.

By James G. Gimpel, Professor of government, University of Maryland

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