DALTON, Ga. — Inside a cavernous factory, massive machines that churn out carpeting for Home Depot and Lowe's were idled on a recent Friday as workers took a forced day off without pay.

Across Dalton, the self-proclaimed "Carpet Capital of the World," storefronts stood vacant, once bustling restaurants were virtually empty and police battled a rising meth problem.

This city in the foothills of the Appalachians, which makes nearly 75 percent of the country's floor coverings, has felt a mountain of economic troubles since the country's real estate boom went bust.

Plummeting demand for flooring has led to a near doubling of Dalton's unemployment rate. Foreclosures are on the rise. And there are signs that the population may be shrinking.

There are doubts that Dalton's economy will ever look the same again — even after the nation's financial crisis ends.

"This has been a tough, tough time," said Ralph Boe, president of Beaulieu of America, one of the "big three" carpet manufacturing companies, which employ a combined 37,000 workers in north Georgia. Boe's company has shed 1,100 jobs over two years.

Another, Shaw Industries Group Inc., announced last week that it was closing plants in Calhoun, near Dalton, and Valdosta, in south Georgia, which will idle about 600 workers.

Mario Moreyra, who lost his job at a Shaw carpet plant, said he would do just about anything to pull in a paycheck right now.

"I'm not being picky and still I'm not finding anything," the 26-year-old said as he scanned online job listings at a career center.

Dalton's reversal of fortune is forcing residents and business leaders to confront an underlying problem that Detroit knows all too well: Its economic rise and fall are too dependent on one industry.

Local officials three years ago launched a drive to diversify the economy and that effort has taken on added urgency since the housing market collapse. Tax breaks and abatements have already helped lure an automobile parts manufacturer to the region.

Brian Anderson, president of the Dalton-Whitfield Chamber of Commerce, said he envisions a new Dalton that is still a manufacturing center but one no longer dependent on just one industry. Job skills from the carpet mills translate into a ready work force, said Anderson, who wants to lure chemicals and plastics companies — and even call centers — to the region.

But such a turnaround could take years. And until then, Dalton's fate is tied to the volatile housing market.

U.S. demand for floor coverings has fallen a combined 34 percent over the past two years, according to the Dalton-based Carpet and Rug Institute.

That impact can be seen in a near doubling of Dalton's jobless rate over the past year to 11.2 percent. The Labor Department says the Dalton region posted the second-highest increase in joblessness in December 2008, compared with the same month the year before.