REGIONAL ECONOMY REMAINS WEAK, BUT RECESSION NOT EXPECTED

Posted 1 year ago

By John Axtell

Creighton economist Ernie Goss

The overall index in Creighton University’s month survey of supply managers in the 9-state Mid-America region came in below the growth-neutral point of 50 for the fifth time in the past six months in December.

Economist and survey head Ernie Goss says the 49.5 index was up 1-1/2 points for the month and up 3 full points from November, pointing to slightly negative to zero growth for the region in the next three to six months, but still no recession.

Goss says there are a lot of factors involved in the regional slowdown, but puts much of the blame on the struggling global economy reducing demand for ag products from the Mid-America region.

Goss also blames the uncertainty caused by the gridlock in Washington over a variety of key issues including the implementation of Obamacare and the fiscal cliff…the expiring tax cuts and coming spending cuts avoided with the compromise passed Monday and Tuesday.

The region’s employment gauge dipped below growth neutral to 48.0 while the prices-paid index, which track inflation through the cost of raw materials and supplies, fell about a point to 63.5.

The confidence index, how the supply managers see things 6 months ahead, rose 6-1/2 points to reach growth-neutral…which Goss thinks is simply a result of things in December not being as bad as the supply managers had feared a month earlier.

The Creighton survey offers numbers for each of the 9 states as well as for the region as a whole. Nebraska, like the region, had its overall index improve slightly…1.1 points…but still come in below growth-neutral for the 5th time in 6 months at 48.4. The various components of the index were also below 50, including employment at 46.7.

Goss says Nebraska was one of only three states in the region to expand its labor force over the last year, but still was able to add jobs at a pace that reduced its unemployment rate to the second lowest in the nation.

Nebraska gained almost 3,000 manufacturing jobs since the national recovery began in July 2009, but Goss expects no more than slow job gains for the first half of 2013 in both the manufacturing and non-manfacturing sectors.

South Dakota’s overall index rose above 50 for the first time in 6 months, but only to tepid 51.9. All the components except inventories were also above 50, with employment at 54.3.

The state’s labor force shrank by approximately 2,600 workers, allowing the unemployment rate to drop despite almost no job growth.

South Dakota has added more than 4,000 manufacturing jobs during the recovery, but Goss says the survey points to a reversal of those gains over the next 6 months with no change in manufacturing jobs and very slow increases in nonmanufacturing jobs.