* Finds worsening poverty, unemployment, housing costs
* From 2005 to 2010, 2.4 million more children became poor
* Some gains in reading levels, access to health insurance
* Poor and minority children struggle in education
By Susan Heavey
WASHINGTON, July 25 (Reuters) - More children and families across the United States are facing poverty and economic instability following the recession, new data shows, raising concerns about the weak economy's long-term impact on the next generation of Americans.
A report released on Wednesday found a rising number of children in nearly every state have families that have seen deeper poverty and economic insecurity since 2005, even as some other areas such as education and healthcare have improved.
The findings from the Annie E. Casey Foundation showed 2.4 million more children slipped into poverty from 2005 to 2010, from 13.3 million to 15.7 million, the data showed.
"The economic well-being of children and families has plummeted because of the recession," researchers at the non-profit youth advocacy group wrote in their annual report on the state of U.S. children.
The report, closely watched by policy makers, is based on data compiled from various government agencies such as the Census Bureau and the Centers for Disease Control and Prevention. For a graphic, see link.reuters.com/muf69s.
Its findings come amid an uncertain recovery in the wake of a national recession that ran from late 2007 to mid-2009 and led to significant unemployment and housing foreclosures.
According to the foundation, in nearly every state and Washington, D.C., there were a growing number of children whose parents did not have stable, full-time employment and whose families were burdened with high housing costs.
Still, there were some gains in health and education.
Dozens of states saw more parents with high school diplomas and fewer teen births. Children in more than 40 states gained access to health insurance, and there were fewer deaths among children and teenagers. Many states also saw steady improvement in the number of children enrolled in preschool as well as gains in reading and math proficiency.
That has created "a mixed picture for kids over the last half decade or so," said Laura Speer, the group's associate director for policy reform and data.
The effect on black, Hispanic and other minority children as well as those who are poor is a particular concern.
Even though the number of U.S. minority children is outpacing whites, the report found those children are hit the hardest, especially when it comes to education.
For example, more than 80 percent of minority children still struggled with reading in the fourth grade compared to 58 percent of white children, data showed.
"Poor kids and kids of color continue to fall behind their more affluent and advantaged classmates," Patrick McCarthy, the foundation's president and chief executive, told reporters.
Additionally, black and American Indian children were twice as likely as whites to have both parents without secure employment. Black, American Indian and Hispanics were also more likely to have just one parent at home than their white peers.
Those disparities could have a profound impact on children's own employment and stability as adults, he added. "These declines in income and assets for families are likely to have a very real and lasting effect on their children."
Additionally, the recession's impact on children varies widely state-by-state, according to the report, which ranks states based on children's overall well-being.
Children in the Northeast and the Upper Midwest fared best, while those living in the Southeast or the Southwest had the worst outcomes. Eight out of 10 states that have the most children also ranked the worst, including California and Texas.
The findings come as state governors continue to wrestle with fiscal problems from the recession. Despite such trouble, policy makers should not lose sight of investing in the nation's youth, the report urged.
Overall, New Hampshire, Massachusetts, Vermont, New Jersey and Minnesota topped the list for child well-being while Arizona, Louisiana, Nevada, New Mexico and Mississippi scored lowest.
Economically, states where natural resources are driving an economic boom - North Dakota, Nebraska, Iowa, South Dakota and Wyoming - ranked highest, while Arizona, Louisiana, New Mexico, Nevada and Mississippi were at the bottom. (Reporting by Susan Heavey; Editing by Eric Walsh)