Mid-American Economy

Negatives Get Less Negative for Mid-America Economy in June: Only 6% Expect Additional Layoffs

June survey highlights:

  • The Business Conditions Index expanded to a reading slightly above growth neutral.
  • Job losses continued for June with an employment index well below growth neutral.
  • In terms of hiring for the rest of 2020, 51% expect no changes, 17% anticipate bringing back furloughed workers, 26% expect to bring back furloughed workers and add new workers, and 6% predicted a continuation of layoffs.
  • Regional trade numbers remain near record lows.

OMAHA, Neb. (July 1, 2020) – The June Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, advanced above growth neutral.

Overall index: After falling below growth neutral for three straight months, the overall index bounced into positive territory for June. The Business Conditions Index, which ranges between 0 and 100, increased to 50.3 from May’s 43.5.

“While the June reading was much higher than I expected, it provides no grounds for celebration. June’s above growth neutral reading indicates that between May and June, business conditions improved. It will take many months of above 50.0 before the regional economy returns to pre-Covid-19 levels,“ said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.  

Employment:  The June employment index continued to indicate job losses, and at a faster pace than in May. The June index slumped to 38.9 from May’s 40.0, but was up from April’s record low of 26.2.

“According to U.S. Department of Labor data between the first week in May and the second week in June, the number of workers in the nine-state region receiving unemployment compensation declined from 1.3 million to 1.2 million,” said Goss.

Said one supply manager, “In June we permanently laid off 40 workers who were already on furlough, while bringing back other workers off furlough. Compared to last month employment is up, but compared to pre-COVID, our employment is down.”

Wholesale Prices: The wholesale inflation gauge for the month indicated an upturn in wholesale prices from May with a wholesale price index of 59.7, up from 48.6 for May.

“Despite June’s reading, I expect to see little to no inflationary pressures at the wholesale level in the weeks and months ahead, even with the Federal Reserve’s, and the U.S. government’s massive economic stimulus programs,” said Goss.

Other June comments from supply managers:

“We have not seen the recession here--no one has been laid off at our place and our economy is recovering quite well.”

“The virus epidemic has reduced our economy, lifestyle, sense of well-being, social interaction, patience and a host of other human values and emotions. Hope is our greatest strength now until we are free to return to our treasured normal lives.”

“RV industry is booming.”

We are a laboratory, so we were considered essential. While the testing we are involved in was way down, it does appear to be starting back up.

“The $600 dollars extra in unemployment was a big mistake with no incentive to go back to work.”

“The resist movement established by the Obama Administration prior to leaving office and continued by the deep state initiative have done more harm to this country than anything previously known. Our future generations will not be able to dig out of the debt we have incurred.”

Confidence: Looking ahead six months, economic optimism, as captured by the June Business Confidence Index, climbed to a strong 65.3 from 56.6 in May.

“The federal stimulus plan, the Federal Reserve monetary incentive programs, and the solid U.S. stock markets boosted confidence from May’s reading,” said Goss.

Inventories: The regional inventory index for June, reflecting levels of raw materials and supplies, climbed to 52.8 from last month’s 48.6.

Trade: The regional trade numbers were, as in previous months, very negative with new export orders rising to a very weak 26.4 from May’s record low of 15.9. Imports fell to 32.0 from 36.0 in May.

The U.S. Department of Commerce recently announced that May exports fell by $5.5 billion, while imports sank by $1.9 billion. “Our June readings point to a continuation of this negative trend,” said Goss.

“Just as the global recession has reduced regional exports, the regional recession has contracted the import of supplies and raw materials for manufacturers among the nine Mid-America states,” said Goss.

Other survey components: Other components of the June Business Conditions Index were new orders at 54.2, up from May’s 31.7; the production or sales index expanded to 52.9 from May’s 33.3; and speed of deliveries of raw materials and supplies index at 52.8 was down from last month’s 63.8.

The Creighton Economic Forecasting Group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators of the Mid-America economy. States included in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The forecasting group’s overall index, referred to as the Business Conditions Index, ranges between 0 and 100. An index greater than 50 indicates an expansionary economy over the course of the next three to six months.

The Business Conditions Index is a mathematical average of indices for new orders, production or sales, employment, inventories and delivery lead time. This is the same methodology, used since 1931 by the Institute for Supply Management (ISM), formerly the National Association of Purchasing Management. The Mid-America report is produced independently of the national ISM.

Arkansas: The June Business Conditions Index for Arkansas rose to 50.9 from May’s 43.7. Components of the June index from the monthly survey of supply managers were: new orders at 58.7, production or sales at 55.2, delivery lead time at 47.4, inventories at 54.4, and employment at 38.8. “Since the onset of COVID-19, Arkansas has lost 88,000 jobs, or almost 7.0% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

Iowa: Iowa’s Business Conditions Index, or overall index, once again slumped below growth neutral. However, the reading climbed to a weak 47.1 from 41.9 in May. Components of the overall June index from the monthly survey of supply managers were: new orders at 50.2, production. or sales at 56.1, delivery lead time at 43.2, employment at 35.7, and inventories at 50.2. “Since the onset of COVID-19, Iowa has lost 161,000 jobs, or approximately 10% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

Kansas: The Kansas Business Conditions Index for June increased to 45.1 from May’s 42.8. Components of the leading economic indicator from the monthly survey of supply managers for June were: new orders at 57.1, production or sales at 30.1, delivery lead time at 46.6, employment at 38.2, and inventories at 53.6. “Since the onset of COVID-19, the state has lost more than 108,000 jobs, or approximately 7.6% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

Minnesota: The June Business Conditions Index for Minnesota increased to 45.0 from 39.8 in May. Components of the overall June index from the monthly survey of supply managers were: new orders at 45.4, production or sales at 56.5, delivery lead time at 40.9, inventories at 47.9, and employment at 34.0. “Since the onset of COVID-19, the state has lost more than 350,000 jobs, or almost 12.0% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

Missouri: The June Business Conditions Index for Missouri climbed to 50.5 from 42.3 in May. Components of the overall index from the survey of supply managers for June were: new orders at 51.3, production or sales at 56.0, delivery lead time at 49.8, inventories at 50.8, and employment at 44.6. “Since the onset of COVID-19, the state has lost 262,000 jobs, or approximately 9.0% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

Nebraska: The state’s overall index for June rose to 52.6 from 43.9 in May. Components of the index from the monthly survey of supply managers for June were: new orders at 59.1, production or sales at 55.2, delivery lead time at 55.5, inventories at 54.6, and employment at 38.9. “Since the onset of COVID-19, Nebraska has lost almost 77,000 jobs, or approximately 7.5% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

North Dakota: The June Business Conditions Index for North Dakota climbed to 51.6 from 43.4 in May. Components of the overall index for June were: new orders at 55.1, production or sales at 55.6, delivery lead time at 57.1, employment at 37.5, and inventories at 52.6. “Since the onset of COVID-19, the state has lost approximately 41,000 jobs, or roughly 9.4% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

Oklahoma: The state’s Business Conditions Index moved above growth neutral in June. The overall index advanced to 53.1 from May’s 43.0. Components of the overall June index were: new orders at 59.9, production or sales at 55.1, delivery lead time at 56.2, inventories at 55.0, and employment at 39.2. “Since the onset of COVID-19, Oklahoma has lost almost 108,000 jobs, or approximately 6.4% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

South Dakota: The June Business Conditions Index for South Dakota increased to 52.4 from May’s 43.8. Components of the overall index from the June survey of supply managers in the state were: new orders at 57.7, production or sales at 55.3, delivery lead time at 56.7, inventories at 53.9, and employment at 38.4. “Since the onset of COVID-19, the state has lost approximately 34,000 jobs, or 7.8% of its employment. Our surveys point to a flattening of employment with only slight job gains in the months ahead,” said Goss.

Survey results for July will be released on Monday, Aug. 3, the first business day of the month.