Recession not ready to free its grip

Economic conditions improved in June but job losses continued in a nine-state region that includes Nebraska, and the area probably will not climb out of the recession until the end of the year, a monthly survey of manufacturing supply managers indicated Wednesday.

The overall Business Conditions Index rose to 49.3 last month from 46.6 in May and 42.7 in April, said Ernie Goss, the Creighton University economics professor who conducts the survey. Numbers below 50 indicate a contracting economy, and numbers above 50 indicate an expanding economy.

“Readings over the past several months indicate that the regional economy has bottomed out,” Goss said. “However, as in past recessions, job creation is just not in the picture.”

The manufacturing sector also reported contraction but at a slower rate: The index was 44.8 in June, up from 42.8 in May, according to the Institute for Supply Management.

States in the Plains and Midwest region in Goss’ survey could emerge from the recession by end of the fourth quarter, with job creation starting in 2010, Goss said. Other states in the survey: Iowa, Arkansas, Kansas, Minnesota, Missouri, North Dakota, Oklahoma and South Dakota.

The June employment index rose to a still weak 41.4 from May’s 40.5, with each of the nine states experiencing job losses and rising unemployment over the past three months, Goss said. It marked the 17th month out of the past 18 months that the area lost jobs.

“The region is now matching the nation in the pace of job losses,” Goss said. “Even as regional economic activity picks up in the second half of 2009, the rate of job losses will continue with rising unemployment rates for most states in the region.”

Inflation has risen, with the index tracking the cost of raw materials and supplies above neutral growth for the first time since October: 52.5 in June, up from May’s 39.3 and April’s 34.2. That indicates heightened inflationary pressures spurred by low interest rates and federal deficit spending, Goss said.

“Consumers, business leaders and investors need to brace for higher inflation surfacing in 2010,” he said.

Looking ahead six months, economic optimism increased to 67.7 in June from May’s 65.9 and April’s 61.4, Goss said.

Other components of the survey:

— Inventories , 46.6 in June, up from May’s 39.3.

— New export orders, 44.4, down from May’s 44.9.

— Imports, 51.4, up from 48.2 in May.

— New orders, 53.4, down from May’s 55.1.

— Production, 54.0, up from 51.0 in May.

— Delivery lead time, 51.0, up from 46.8.

Nebraska’s overall index was below neutral growth for the 10th straight month, edging up to 45.7 in June from May’s 44.3.

Goss said he expects Nebraska’s unemployment rate, which was 4.4 percent in May, to stabilize at 4.9 percent in the third quarter, or between now and September.

Iowa’s overall index climbed above neutral growth for the first time since May 2008, at 51.2 in June from May’s 48.3. Iowa’s unemployment rate could top 6 percent before it stabilizes between now and September, Goss said. Iowa’s unemployment rate was 5.9 percent in May.

Contact the writer: 444-1117, joe.ruff@owh.com

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