In his long hunt for work, Ron Sanson has rarely been so grateful to be turned down for a job.

"I didn't have any suspicions," he said. "He looked like a farmer. He had a baseball cap. A flannel shirt. Scraggly looking beard … Then they started finding the bodies. If I had gone up there, they would have had a grave dug for me."

Sanson, 58, replied to a job advert on Craigslist in October looking for a watchman on an Ohio farm. The position paid just $300 a week but came with a trailer home to live in free. The applications flooded in from desperate men across the country willing to work for low pay just to have a little income.

Except there was no farm and no job.

Richard Beasley, a self-styled preacher with convictions for burglary, is alleged to have posted the advert to lure men to an isolated wood and shoot them.

Beasley and a 16-year-old schoolboy, Brogan Rafferty, are accused of shooting four men, killing three of them, who travelled from as far as Virginia and Florida as well as from Ohio. The police suspect there are more victims.

The alarm was raised by one of the four, from South Carolina, who was shot but escaped and hid in the woods for hours. When the police arrived they found a shallow grave already dug for him.

Ron Sanson. Photograph: Chris McGreal

Sanson said that after he responded to the advert, Beasley arranged to interview him at a shopping mall. He was disappointed to hear that scores of men were after the job.

"When I saw the Craigslist ad I thought this is perfect, being out on a farm with no one around. The money was nothing but it would pay for food," he said. "When I talked to Richard Beasley he said more than 100 people applied for that job and they were from all over the place. It shows because they have people from all over showing up dead."

The police are unsure about the motive for the killings.

The victims were in their late 40s or older, an age when it is often harder to land work. Some were drifters, others had moved from one low-paying job to another.

But there were men like Sanson, too, who just a few years ago regarded themselves as solidly middle-class and prosperous, and who back then could not have imagined pursuing a $300-a-week job and living in a trailer.

Today they find themselves among the ranks of the near-destitute as the number of people living in poverty grows nearly twice as fast in many of the US's once-affluent suburbs as in its inner cities. For the first time since the postwar industrial boom, the American dream is being rolled back and the middle class is shrinking.

Sanson spent three decades building up his own construction company, earning $60,000 a year or more. The firm went into decline with the mortgage crisis, which hit Ohio earlier than much of the US, and out of business three years ago.

Since then Sanson says he has applied for 50 or more jobs. Now he lives off a $370-a-month military pension and relies on $160 a month in food stamps to eat. He has no medical insurance.

"I've had to sell a lot of things. The antiques I had I've had to get rid of. Family heirlooms. Mostly furniture. Corner cabinets, dressers, bookcases," he said. "I've run out of things to sell."

He is not alone.

"I had a lot of friends who worked on the steel mills for a long time and they're out of jobs," he said.

Sanson lives in Stow, a town about 45 miles south of Ohio's largest city, Cleveland. Stow is lined with neat two-storey homes and bungalows constructed during the years when the flourishing car industry was driving the local economy. Many of the early residents were the first generation to own cars and televisions. Now, across north-eastern Ohio, the American dream is in retreat.

Thirteen Cleveland suburbs that in the 90s were booming middle-class neighbourhoods now have a higher rate of poverty than the city itself as average household incomes have plummeted to their lowest in 25 years. More than half of all children in Cleveland live below the poverty line.

It's a situation reflected across large parts of America. The latest census data shows that nearly one in two of the US's 300 million citizens are now officially classified as having a low income or living in poverty. One in five families earns less than $15,000 (£9,600) a year.

Northern Ohio is among the worst hit, particularly Cleveland and its satellite towns where 60% of poor people now live in the suburbs. The number of people on food stamps in the city's suburbs has nearly quadrupled to about 60,000.

Feeding centres have appeared in suburbs that could never have imagined such a thing, such as Maple Heights where a "food pantry" distributing free provisions to the needy opened three years ago.

"Some people are embarrassed," said the pantry manager, Evelyn Knuckles. "And some people are not embarrassed. They only want brand-named food. They're in need but they still want the brands they used to eat. It's very aggravating at times."

Similar pantries in suburbs around northern Ohio get many of their supplies from a central distributor, the Cleveland Food Bank.

"Take Lake County," said Anne Goodman, who runs the food bank. "Very nice suburb. Nobody in Lake County ever thought there would be a problem but we have tripled our distribution there in the last two or three years. Things are not like they always were. People who were working at a steel company making $40 an hour are now making $10 flipping burgers at McDonald's or whatever."

That has forced many people to make difficult choices as they juggle the costs of food, housing, utilities and healthcare. Some cut back on essential medications or stop visiting the doctor even when sick because without a job, or with a low-paying one, they do not have health insurance. Others raid their retirement savings funds, often a reflection of real desperation because they not only face a large tax penalty but are left without a pot of money for old age.

The situation is only going to get worse in January when 70,000 people in Ohio will have drawn the maximum three years of unemployment benefit and will not be eligible for more assistance other than food stamps.

Claudia Coulton, co-director of the urban poverty centre at Cleveland's Case Western Reserve University, said that for the first time since the 1930s, large numbers of Americans were slipping out of the middle class and into poverty with every sign they would not easily escape again. Even if they can find work, it is generally poorly paid.

"This recession has pushed people who were barely into the middle class down below the poverty line. You're getting people who had decent jobs for long periods losing those jobs," she said. "In the United States we used to think we had two kinds of poverty; inner-city poverty and rural poverty. But now we find more of the poor are living in the suburbs. That's a recent phenomenon."

Goodman said that while some older people were too proud to ask for help, many families were now so desperate that pride was cast aside.

"It's got to be a horrible experience. There's nobody that likes going and saying: 'I can't feed my family.' It has to be one of the lowest points of somebody's life," she said.

Shian Davenport, of Hudson, Ohio, advertises her desire for work. Photograph: Chris McGreal/guardian.co.uk

Shian Davenport is standing at the entrance to a shopping mall car park in Hudson, Ohio – an affluent small town just north of Stow. She has been there for several hours, with a scarf, hat and fleece but no coat in close to freezing temperatures, holding a sign: "Mother of 3. Will work, any assistance appreciated! Happy Holidays. God Bless."

"I was an assistant manager at a Pizza Hut for five years. When I lost my job I never worried about finding another job. I imagined jobs were easy to come by. I was wrong," she said. "It's not like I don't know how to work. I've tried factories, grocery stores, anything."

Davenport, 27, stands on street corners five or six days a week to keep a roof over the head of her three sons aged between four and nine. It is her only income apart from food stamps.

"On a good day I earn $50. The worst day was $7," she said. "My husband is a roofer. He has no work. He hates it that I come out here. But I have three kids and I have to look after them. Food stamps don't pay bills."

As Davenport speaks, another woman with a sign pleading for money appears at the next entrance to the car park. A third is just around the corner.

The desperation for jobs is such that when a new casino opening in central Cleveland in March advertised 650 positions it received 12,500 applications.

Coulton said that in Cleveland and some other parts of the industrialised north, those who fall into poverty will not easily escape because of the collapse in property prices. There is demand for skilled workers in other parts of the country but many people cannot sell their houses because they are now worth less than the mortgage. There are, in any case, few buyers. If owners abandon the mortgage they will not be able to get another elsewhere.

After his business collapsed, Sanson worked at his sister's charity second-hand shop for a year, running the warehouse.

"It wasn't much money and only 15 or 20 hours a week. I was paying the bills but that was it. Then they couldn't afford me," he said. "But I never imagined I'd be on food stamps."

But the dream is not quite dead. Sanson is putting his hopes in making a fresh start in southern Ohio buying up an abandoned convenience store he can live above.

"I'm waiting to see if I can borrow the money," he said.