The Southern California Association of Governments released its annual State of the Region report Thursday giving the region’s economy a “B” grade for its improving employment picture.

The annual report, which covers Los Angeles, Orange, Riverside, San Bernardino and Ventura Counties, also highlighted continued improvements in employment and crime rate, while noting increased traffic congestion, shrinking affordable housing and a decaying educational system.

The report pointed to “broad-based expansion” in all regional job markets saying “every county in the region achieved job increases” over the last year. In total, the area added 120,000 jobs in 2005, the largest increase since 2000.

The report gave a “B” grade in the safety category, noting that while violent crime decreased 11 percent from 2004, beating a state-wide reduction of 5 percent. The report was highly critical of the region’s transportation, housing and educational picture.

Mobility received an “F” grade given high gas prices, increased commuting distances and sluggish carpool participation. A “D” grade was given in housing due to a decline in building, and a slow increase in regional homeownership, which has increased only 2 percentage points since 2000.

The report also stated that the region continued to perform below national averages in education, culminating in a “D” grade. While L.A. County did see a noticeable decline in the high school dropout rate, the region remained in last place among all other major metro areas in the percentage of adults with at least a high school diploma (77 percent) or at least a bachelor’s degree (27 percent).