Survey: Midwest Economy Improving

August 4, 2009

The Institute for Supply Management, formerly the Purchasing Management Association, began formally surveying its membership in 1931 to gauge business conditions.

The Creighton Economic Forecasting Group uses the same methodology as the national survey to consult supply managers and business leaders. Creighton University economics professor Ernie Goss oversees the report.

A recent survey of supply managers and other business executives in nine Midwest and Plains states suggests the region’s economy is expanding for the first time in almost a year.

The Mid-America Business Conditions index released Aug. 3 rose to 51.7 in July from June’s 49.3. July’s index was the first time since August 2008 that it rose above growth-neutral 50.

The overall index ranges between 0 and 100. A figure greater than 50 indicates an expanding economy over the next three to six months.

Here are the state-by-state results of the July survey in the Mid-America region:

Arkansas: The state’s overall economic index rose for the sixth straight month. July’s index climbed to a still weak 43.8 from 41.0 in June. Components of the overall index were new orders at 43.5, production at 48.7, delivery lead time at 41.6, inventories at 43.0 and employment at 42.2. Goss said he expects the state’s unemployment rate to peak at 7.6 percent, its highest level since 1988, in the fourth quarter.

“Arkansas will continue to bleed manufacturing jobs, both durable and nondurable, in the months ahead,” Goss said. “However, the pace of these job losses will diminish significantly from the rate experienced earlier this year.”

Iowa: Iowa’s overall index dipped slightly below the growth-neutral mark of 50.0 in July, to 49.8 from 51.2 in June. Components of the overall index were new orders at 55.0, production at 49.2, delivery lead time at 51.6, employment at 49.6 and inventories at 43.5. Goss said he expects the Iowa unemployment rate reach 6.5 percent in the fourth quarter, its highest level since 1986. He said the state will continue to lose durable-goods manufacturing jobs. But he said the pace of those losses will slow, compared with earlier this year.

“Employment in Iowa’s nondurable-goods sector, including food processing, has stabilized, with no job losses expected for the rest of the year,” Goss said.

Kansas: The state’s overall index rose last month, to 37.3 from June’s regional low of 29.7. Components of the overall index were new orders at 36.2, production at 34.1, delivery lead time at 49.7, employment at 27.6 and inventories at 39.1. Goss said that in the fourth quarter he expects Kansas’ unemployment rate to peak at 7.4 percent, its highest level since 1982.

“Kansas will continue to shed durable-goods manufacturing jobs, especially in the state’s large aircraft manufacturing sector and firms with linkages to this sector,” Goss said.

Minnesota: For the 12th month in a row, Minnesota’s overall index remained below growth neutral. Nonetheless, in July it rose to 45.2 from 43.9 in June. Components of the overall index for July were new orders at 45.4, production at 49.1, delivery lead time at 51.6, inventories at 43.6 and employment at 36.3.

Goss said he expects the state’s unemployment rate to reach 8.9 percent, its highest level since 1982, in the fourth quarter. He predicted that Minnesota will continue to lose jobs in the months ahead, but at a slower pace than earlier this year.

Missouri: For the first time since September last year, the state’s overall index rose above growth neutral. It hit 52.6 in July, compared with 49.7 in June. Components of the overall index were new orders at 61.4, production at 57.4, delivery lead time at 53.5, inventories at 47.8 and employment at 43.0.

Goss said he expects Missouri’s unemployment rate to peak at 9.6 percent in the fourth quarter. That would be its highest rate since 1983. He expected Missouri to continue losing jobs, but at a slower pace than earlier in 2009.

Nebraska: The state’s overall index rose above growth neutral for the first time since August last year. The index jumped to 50.1, compared with 45.7 in June and 44.3 in May. Components of the overall index were new orders at 58.9, production at 55.6, delivery lead time at 46.0, inventories at 47.6 and employment at 42.4. Goss said he expects Nebraska’s unemployment rate will hit 5.3 percent, its highest level since 1986, in the fourth quarter.

“I don’t expect manufacturing-job losses for the state in the second half of 2009,” Goss said. “However, I do expect Nebraska to lose nonmanufacturing jobs, albeit at a slower pace, for the rest of 2009.”

North Dakota: For the first time since December, North Dakota’s overall index rose above growth neutral. It hit a regional high of 52.8 in July, compared with 45.6 in June. Components of the overall index were new orders at 56.4, production at 52.1, delivery lead time at 55.4, employment at 51.2 and inventories at 48.9.

Goss said North Dakota’s unemployment rate peaked at 4.3 percent, its highest level since 1993, in the second quarter of this year. “I expect little to no change in the rate of joblessness in the state for the rest of the year,” Goss said. “Job losses in manufacturing have been offset by gains in nonmanufacturing for 2009. While I do not expect the state to add manufacturing jobs in the second half of the year, my forecast is stability in both manufacturing and nonmanufacturing.”

Oklahoma: The state’s overall index remained above growth neutral for the second straight month. The Oklahoma index dropped slightly, to 52.3 from June’s regional high 53.6. Components of July’s overall reading were new orders at 56.3, production at 52.9, delivery lead time at 53.2, inventories at 49.6 and employment at 49.3. Goss said he expects Oklahoma’s unemployment rate to reach 6.5 percent, its highest level since 1992, in the fourth quarter.

“The state will continue to shed durable-goods manufacturing jobs, albeit at a slower pace,” Goss said. “On the other hand, employment has stabilized in nondurable manufacturing and nonmanufacturing sectors.”

South Dakota: For the first time since October, South Dakota’s overall index jumped above growth neutral, to 51.8 in July from 43.6 in June and 38.9 in May. Components of the overall index were new orders at 73.4, production at 62.8, delivery lead time at 43.1, inventories at 34.6 and employment at 45.2. Goss said he expects South Dakota’s unemployment rate to peak at 5.4 percent, its highest level since 1983, in the fourth quarter. The state has lost more than 7,000 jobs in 2009, Goss said, about a third of them in manufacturing.

“While I do expect job losses in the second half of the year, those losses will be significantly down from the first half of the year,” he said.

Creighton Economic Forecasting Group: www.outlook-economic.com

Topics Trends Oklahoma Iowa Missouri Kansas Minnesota Manufacturing North Dakota Nebraska South Dakota

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