Mid-American Economy

Labor Shortages Slow Mid-America Growth for April: Almost Half See Labor Shortages as Biggest Challenge

April survey highlights:

           · Labor shortages pushed the overall index lower for the month. Even so, the overall index remained above growth neutral.

           · Approximately 44.7 percent of supply managers identified labor shortages as the greatest threat to company success in the next 12 months.

           · Almost one-third of supply managers indicated that only price exceeded data security in selecting a vendor.

           · Exports and imports improved for the month.

OMAHA, Neb. (May 1, 2019) – The April Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell to a still solid reading signaling positive growth for the region over the next three to six months.

Overall index: The Business Conditions Index, which ranges between 0 and 100, declined to 55.9 from March’s 58.2. This marks the 29th straight month the index has remained above growth neutral 50.0.

“The regional economy continues to expand at a positive pace. However, as in recent months, finding and hiring qualified workers remained the chief threat to manufacturing economy for the region. Approximately 44.7 percent identified labor shortages as the greatest threat to company success in the next 12 months,” 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:  As a result of worker shortages, the April employment index fell to a tepid 51.1 from March’s solid 56.4.

“Until recently, overall manufacturing employment growth in the region has been very healthy and exceeded that of the nation,” said Goss.  “However, overall employment growth for the region over the past 12 months at 0.5 percent is well below national job growth of 1.5 percent,” said Goss.

Wholesale Prices: The wholesale inflation gauge for the month indicated modest inflationary pressures for the month with a wholesale price index of 67.5 from 74.5 in March. “I expect tariffs and flood impacts to boost the inflation index slightly higher in the months ahead,” said Goss.  

Almost one-third, or 29.2 percent, of supply managers indicated that only price exceeded data security in selecting a vendor.

Confidence: Looking ahead six months, economic optimism, as captured by the April Business Confidence Index, advanced to a healthy 62.2 from March’s 57.2.

“However, I expect business confidence to depend heavily on trade talks with China as well as U.S. economic growth in the weeks and months ahead,” reported Goss.

Inventories: Companies expanded inventories of raw materials and supplies for the month and at a faster pace in April. The April inventory index expanded to 53.5 from 52.2 in March.            

Trade: The regional trade numbers for April were solid, but with both imports and exports expanding for the month. The new export orders index moved higher to 53.9 from March’s 53.4, and the import index fell climbed to 57.0 from to 51.7 in March.

Other survey components: Components of the April Business Conditions Index were new orders at 62.2, up from March’s 58.8; the production or sales index at 58.4, down from 60.9 in March; and speed of deliveries of raw materials and supplies index at 54.4, down from last month’s 62.7.     

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, formerly the National Association of Purchasing Management.

Arkansas: The April Business Conditions Index for Arkansas declined to 57.7 from March’s 61.6. Components of the index from the monthly survey of supply managers were new orders at 64.5, production or sales at 61.1, delivery lead time at 55.4, inventories at 55.5, and employment at 51.9. “Over the last 12 months, the Arkansas economy has added jobs at a 2.5 percent pace, a regional high, while durable and nondurable goods manufacturers have expanded jobs at a rate of 4.6 percent and 2.2 percent, respectively,” said Goss.

Iowa: The April Business Conditions Index for Iowa plummeted to 48.9 from March’s 57.8. Components of the overall index from the monthly survey of supply managers were new orders at 56.4, production or sales at 51.1, delivery lead time at 46.3, employment at 44.4, and inventories at 46.5. “Over the last 12 months, the Iowa overall economy has added jobs at a 0.7 percent pace, while durable and nondurable goods manufacturers have expanded jobs at a rate of 0.4 percent and 2.1 percent, respectively,” said Goss.

Kansas: The Kansas Business Conditions Index for April sank to 48.3 from March’s 55.2. Components of the leading economic indicator from the monthly survey of supply managers were new orders at 55.8, production or sales at 50.5, delivery lead time at 45.7, employment at 43.9, and inventories at 45.8. “Over the last 12 months, the Kansas overall economy has added jobs at a 0.9 percent pace, while durable and nondurable goods manufacturers have expanded jobs at a rate of 4.3 percent and 0.4 percent, respectively,” said Goss.

Minnesota: The April Business Conditions Index for Minnesota expanded to 54.5 from 53.0 in March. Components of the overall April index from the monthly survey of supply managers were new orders at 60.9, production or sales at 56.7, delivery lead time at 51.3, inventories at 51.5, and employment at 52.3“Over the last 12 months, the Minnesota overall economy has lost jobs at a minus 1.7 percent rate, a regional low, while durable and nondurable goods manufacturers have shed jobs at a rate of minus 0.4 percent and minus 1.2 percent, respectively,” said Goss. 

Missouri: The April Business Conditions Index for Missouri rose to 57.6 from 57.3 in March. Components of the overall index from the survey of supply managers were new orders at 60.9, production or sales at 56.7, delivery lead time at 59.2, inventories at 56.7, and employment at 54.3. “Over the last 12 months, the Missouri overall economy has added jobs at a 0.5 percent pace, while durable and nondurable goods manufacturers have expanded jobs at a rate of 2.0 percent and 1.6 percent, respectively,” said Goss.

Nebraska: After dipping below growth neutral for December, Nebraska’s Business Conditions Index has moved above the threshold of 50.0 each month since, though the state’s overall index fell in April to 53.8 from March’s 57.1. Components of the index from the monthly survey of supply managers were new orders at 60.5, production or sales at 56.7, delivery lead time at 53.8, inventories at 51.5, and employment at 48.6. “Over the last 12 months, the Nebraska overall economy has added jobs at a 0.3 percent pace, while durable and nondurable goods manufacturers have lost jobs at a rate of minus 4.6 percent and minus 0.9 percent, respectively,” said Goss.

North Dakota: The April Business Conditions Index for North Dakota sank to 50.6 from 55.0 in March. Components of the overall index were new orders at 57.9, production or sales at 53.0, delivery lead time at 48.0, employment at 45.8, and inventories at 48.1. “Over the last 12 months, the North Dakota economy has added jobs at a 2.0 percent pace, while durable and nondurable goods manufacturers have expanded jobs at a rate of 4.2 percent and 4.9 percent, respectively,” said Goss.

Oklahoma: For the first time in 21 months Oklahoma’s Business Conditions Index has moved below 50.0. The overall index from a monthly survey of supply managers for April fell to 48.6 from 53.9 in March. Components of the overall April index were new orders at 56.1, production or sales at 50.4, delivery lead time at 46.0, inventories at 46.1, and employment at 44.1. “Over the last 12 months, the Oklahoma economy has added jobs at a 1.1 percent pace, while durable and nondurable goods manufacturers have expanded jobs at a rate of 5.5 percent and 4.4 percent, respectively,” said Goss.

South Dakota: The April Business Conditions Index for South Dakota climbed to a regional high of 62.2 from March’s 70.8, also a regional high. Components of the overall index from the April survey of supply managers in the state were new orders at 68.7, production or sales at 66.2, delivery lead time at 60.0, inventories at 60.2, and employment at 55.8. “Over the last 12 months, the South Dakota economy has added jobs at a 1.7 percent pace, while durable and nondurable goods manufacturers have expanded jobs at a rate of 1.8 percent and 1.1 percent, respectively,” said Goss.

Survey results for May will be released on the first business day, June 3.