Mid-American Economy

Year End Mid-America Manufacturing Index Falls: Finding & Hiring Workers Top 2021 Challenge

December survey highlights:

  • For a second straight month, the regional Business Conditions Index declined, but remained in growth range.
  • Approximately 36% of manufacturers reported that finding and hiring qualified workers would be their top challenge for 2021. This compares to 70% recorded last year at this time.
  • On average, supply managers expect to receive an average wage and salary increase of 2.1%. This compares to 2.5% recorded at this time last year.
  • The wholesale inflation gauge indicates elevated inflation in the pipeline.
  • Comparative 2020 economic performance from top to bottom: (1) Nebraska, South Dakota, Arkansas, Missouri, Kansas, Oklahoma, Iowa, Minnesota and (9) North Dakota.

OMAHA, Neb. (Jan. 4, 2021) – For a second straight month, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell, but remained above growth neutral for the month.

Overall index: In April of this year, COVID-19 pushed the overall index to its lowest level in 11 years. Since April, the overall index has climbed above growth neutral 50.0 for seven of the past eight months. The Business Conditions Index, which ranges between 0 and 100, dropped to 64.1 from November’s 69.0.

“Creighton’s monthly survey results have mirrored the national manufacturing survey results indicating that the manufacturing sector has been expanding at a solid, but slowing, pace since sinking to a post-2008 recession low in April. Even so, current output in the regional and U.S. manufacturing sectors remains well below 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 regional employment index remained well above growth neutral for December, but fell to 57.7 from 63.1 in November. Since the onset of COVID-19, U.S. Bureau of Labor Statistics data indicate that regional nonfarm employment is down 655,000 jobs, or 4.7%, and regional manufacturing employment is off by 66,000 jobs or 4.5%.

Since bottoming out in April, regional manufacturing has gained back roughly 43,000 of the initial manufacturing job losses.

In December, supply managers were asked to identify the greatest 2021 economic challenge for their firm. Approximately 36% reported that finding and hiring qualified workers would be their top challenge for 2021. Another one fifth, or 20%, named rising input prices as the biggest 2021 challenge.

On average, supply managers expect to receive an average wage and salary increase of 2.1%, with one-fifth of respondents anticipating no 2021 wage increase.

Other comments from December survey participants:

“Besides rising prices as the top challenge for 2021, a close second is finding qualified workers throughout our supply chains.”

“Based on our customer orders we have in hand, 2021 is going to be a record year as far as products sold. I am concerned the supply base cannot keep up. Also, the price of steel is a large concern.”

Wholesale Prices: The wholesale inflation gauge for the month slipped to a still inflationary 81.5 from 84.8 in November.

“Over the past six months, the seasonally adjusted consumer price index has risen by 2%, or 4% annualized. Despite this pickup in inflationary pressures at the consumer level, the Federal Reserve remains comfortable with current ultra-low short-term interest rates. In recent meetings of the rate setting committee, the FOMC, they indicated they will likely keep short-term interest rates at near record lows well into the future even as inflation ticks up above their target,” said Goss.

Confidence: Looking ahead six months, economic optimism, as captured by the December Business Confidence Index, plummeted to 45.8 from November’s 50.0.

“A sharp upturn in COVID-19 infections, along with more economic lockdowns, weighted on December’s economic outlook,” said Goss.

Inventories: The regional inventory index for December, reflecting levels of raw materials and supplies, slumped to a still solid 55.8 from last month’s 59.2.

Trade: The regional trade numbers were weakened for the month, with new export orders sinking to 50.1 from November’s 75.0. An expanding domestic manufacturing sector supported a solid import index at 63.2, down from 67.9 in November.

“The trade-weighted value of the U.S. dollar has declined by approximately 10 percent over the past nine months. Moreover, the outlook continues to be negative for the dollar. The cheaper dollar makes U.S. goods more competitively priced abroad. I expect this trend to be very supportive of U.S. exports in the months ahead,” said Goss.

Other survey components: New orders at 66.0, down from 77.3 in November; the production or sales index plummeted to a still healthy 61.6 from 78.3 in November; and the speed of deliveries of raw materials and supplies index at 79.7 up significantly from last month’s 67.4.

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 December Business Conditions Index for Arkansas increased slightly to 62.3 from November’s 62.2. Components from the December survey of supply managers were: new orders at 64.9, production or sales at 60.9, delivery lead time at 76.6, inventories at 52.3, and employment at 56.7. Since the onset of COVID-19 in February, the Arkansas economy has lost a net of 41,000 nonfarm jobs, or 3.2%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Construction.

Iowa: Iowa’s Business Conditions Index remained above growth neutral for December though the reading declined to 64.7 from 74.6 in November. Components of the overall December index were: new orders at 66.2, production. or sales at 62.5, delivery lead time at 83.0, employment at 55.6, and inventories at 57.7. Since the onset of COVID-19 in February, the Iowa economy has lost a net of 78,000 nonfarm jobs, or 4.9%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Financial Activities.

Kansas: The Kansas Business Conditions Index for December decreased to 55.3 from 60.1 in November. Components of the leading economic indicator from the monthly survey of supply managers were: new orders at 62.7, production or sales at 58.2, delivery lead time at 65.6, employment at 44.2, and inventories at 45.6. Since the onset of COVID-19 in February, the Kansas economy has lost a net of 69,000 nonfarm jobs, or 4.8%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Construction.

Minnesota: The December Business Conditions Index for Minnesota declined to 67.6 from 73.2 in November. Components of the overall December index were: new orders at 67.3, production or sales at 63.8, delivery lead time at 88.5, inventories at 54.0, and employment at 64.4. Since the onset of COVID-19 in February, the Minnesota economy has lost a net of 195,000 jobs, or 6.5%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Financial Activities.

Missouri: The December Business Conditions Index for Missouri dropped to 67.2 from November’s 75.6. Components of the overall index from the survey of supply managers for December were: new orders at 65.4, production or sales at 61.5, delivery lead time at 78.9, inventories at 72.0, and employment at 58.3. Since the onset of COVID-19 in February, the Missouri economy has lost a net of 115,000 nonfarm jobs, or 4%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Construction.

Nebraska: Nebraska’s overall index for December rose to 67.0 from 66.8 in November. Components of the index from the monthly survey of supply managers for December were: new orders at 66.3, production or sales at 62.6, delivery lead time at 83.5, inventories at 61.2, and employment at 61.2. Since the onset of COVID-19 in February, the Nebraska economy has lost a net of 35,000 nonfarm jobs, or 3.4%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Education & Health Services.

North Dakota: The December Business Conditions Index for North Dakota expanded to 62.8 from 57.2 in November. Components of the overall index for December were: new orders at 64.4, production or sales at 60.3, delivery lead time at 74.2, employment at 55.2, and inventories at 60.0. Since the onset of COVID-19 in February, the North Dakota economy has lost a net of 33,000 nonfarm jobs, or 7.4%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Financial Activities.

Oklahoma: Oklahoma’s Business Conditions Index expanded above growth neutral in December. The overall index climbed to 55.9 from November’s 49.4. Components of the overall December index were: new orders at 62.6, production or sales at 58.1, delivery lead time at 65.1, inventories at 44.4, and employment at 49.3. Since the onset of COVID-19 in February, the Oklahoma economy has lost a net of 72,000 nonfarm jobs, or 4.3%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Financial Activities.

South Dakota: The December Business Conditions Index for South Dakota climbed to 76.3 from 71.7 in November. Components of the overall index from the December survey of supply managers in the state were: new orders at 67.3, production or sales at 63.9, delivery lead time at 88.7, inventories at 96.9, and employment at 64.5. Since the onset of COVID-19 in February, the South Dakota economy has lost a net of 15,000 nonfarm jobs, or 3.5%, according to the U.S. Bureau of Labor Statistics. Top performing industry for 2020: Construction.

Survey results for January will be released on Feb. 1, 2021, the first business day of the month.