Index opens door to hope

The economy in Nebraska and eight other states appears to be taking its first steps toward recovery, but it is a fragile process, an economics professor said Thursday as a monthly survey of manufacturing supply managers rose to its highest level in two years.

The Mid-America Business Conditions Index rose to 56.2 for September. Readings above 50 indicate an expanding economy, but in August the index slipped to 48.4 after rising to 51.7 in July.

That indicates a volatility that tempers optimism, said Ernie Goss, the Creighton University professor who conducts the survey.

In addition, a drop in farm income this year, compared with a robust 2008, is hurting agriculture-related businesses in the region surveyed, which encompasses Iowa, Arkansas, Kansas, Minnesota, Missouri, Nebraska, Oklahoma, North Dakota and South Dakota.

Still, the employment index increased to 52.1, going above growth neutral for the first time since March 2008, Goss said.

The region has lost nearly 400,000 jobs since September 2008, or 3 percent of employment, he said.

The rate of job losses should diminish in the months ahead, Goss said.

“However, any job gains are likely to be very modest well into 2010.”

Nationwide, a similar index from the Institute of Supply Managers registered 52.6 for September, dipping from August’s 52.9.

Goss’ survey found heightened inflationary pressures as the prices-paid index, which tracks the cost of raw materials and supplies, moved above growth neutral for a fourth straight month to 68.1 from August’s 66.9 and July’s 61.5.

Economic optimism for the next six months advanced to 73.4 in September from August’s 63.1, bouyed by low interest rates and a slowly improving housing market.

“This is the first time since the recession began that positive reports of current economic conditions have mirrored the positive outlook,” Goss said.

Other components of the survey included new export orders at 54.6 compared with August’s 44.7 and imports climbing to 56.0 from August’s 47.5.

The inventory index rose to 43.5 from August’s 39.8. Goss said he expected to see more restocking of supplies and raw materials in the fourth quarter, which should further stimulate the regional economy.

The new orders index rose to 64.5 in September, up from 50.0 in August; production was up to 66.0 from 58.0; and delivery lead time was at 54.8, down slightly from 54.9.

Supply managers also were asked whether they supported a public option for health insurance as part of the health care overhaul. Fifty-nine percent opposed it and 22 percent supported it, Goss said.

In Nebraska, the overall business conditions index rose to 52.5 from 48.2 in August.

Nebraska lost more than 13,000 jobs over the past year, or 2.9 percent of its nonfarm employment, Goss said. No additional job losses were expected, though the unemployment rate could rise slightly as some people who left the work force return to the job hunt and get counted among the jobless, Goss said.

In Iowa, the overall index hit 52.9 in September from 48.9 the month before, Goss said. Iowa has lost nearly 50,000 jobs over the past year, or 3.2 percent of its nonfarm employment, Goss said. Job losses should cease and a slight decline in the unemployment rate could be seen by the end of the year, Goss said.

Contact the writer:

444-1117, joe.ruff@owh.com

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