Mid-America Index highest in 2 years: Manufacturing employment gains during August

The August 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, and to its highest level in two years.

After falling below growth neutral for three straight months, the overall index bounced into positive territory for June, July, and August. The Business Conditions Index, which ranges between 0 and 100, increased to 60.0 from July’s 57.4.

“While the August reading was certainly encouraging, manufacturing activity in the region remains below pre-COVID-19 levels. Creighton’s regional index has been mirroring the national ISM index with reading above growth neutral for June and July,” 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, Omaha, Nebraska. 

Contributing factors

For the first time since January of this year, the regional employment index moved above growth neutral. The August index climbed to 54.8, its highest level since July 2019, and up from last month’s July 48.5. Even though the insured unemployment rate for the region is approximately 4.5% higher than that immediately prior to COVID-19, four of five supply managers reported that their firms were experiencing difficulty finding and hiring qualified workers.

The wholesale inflation gauge for the month indicated a fall in wholesale prices from July with a wholesale price index of 52.3, down from 65.2 in July.

“Recessionary economic conditions from COVID-19 are putting downward pressure on wholesale inflation. Importantly, low inflation has pushed the Federal Reserve to be more comfortable with current ultra-low short-term interest rates. In its latest meeting, the Fed rate setting committee, the FOMC, indicated it will likely keep short-term interest rates at near record lows well into the future even if inflation ticks up above their target,” Goss said.

Looking ahead six months, economic optimism, as captured by the August Business Confidence Index, climbed to a strong 73.3, its highest level since February 2018, and up from 68.3 in July. The federal stimulus plan, the Federal Reserve monetary incentive programs, and U.S. stock markets boosted confidence from July’s already solid reading.

“Since our survey was conducted after August’s derecho, I expected to record weaker business confidence. However, our survey indicates that the region’s manufacturing sector was spared much of the negative impacts,” reported Goss.

The regional inventory index for August, reflecting levels of raw materials and supplies, sank to 41.7 from last month’s 45.3.

The regional trade numbers were mixed with new export orders rising to 58.3 from July’s 47.9. An expanding manufacturing sector pushed the import index to 56.8 from July’s 53.9.

The U.S. Department of Commerce recently announced that June exports were 24% below year-ago levels.

“Our August readings point to improvements in the regional trade picture in the months ahead,” Goss said.

Other survey components

Other notes from the August Business Conditions Index were new orders reached 72.6, up from 67.2 in July; the production or sales index expanded to 67.7 from July’s 65.2; and speed of deliveries of raw materials and supplies index at 63.3, up from last month’s 61.2 (indicating slower deliveries for August).

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. The Mid-America report is produced independently of the national ISM.

State reports

The August Business Conditions Index for Arkansas rose to 63.0 from July’s 61.0. Components from the monthly survey of supply managers were: new orders at 74.0, production or sales at 72.6, delivery lead time at 75.4, inventories at 40.9, and employment at 52.1. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 15,000 jobs, a decline of 9.4%,” Goss said.

Iowa’s Business Conditions Index inched above growth neutral for the month. The reading climbed to 56.4 from 50.9 in July. Components of the overall August index from the monthly survey of supply managers were: new orders at 72.5, production. or sales at 67.7, delivery lead time at 66.5, employment at 48.0, and inventories at 43.6. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 6,000 jobs, a decline of 2.7% with transportation equipment manufacturing accounting for a large share of the losses,” Goss said.

The Kansas Business Conditions Index for August increased to 63.0 from July’s 59.2. Components of the leading economic indicator from the monthly survey of supply managers for August were: new orders at 73.6, production or sales at 71.1, delivery lead time at 58.2, employment at 67.8, and inventories at 44.2. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 13,000 jobs, a decline of 7.7% with transportation equipment manufacturing accounting for a large share of the losses,” Goss said.

The August Business Conditions Index for Minnesota slipped to 54.5 from 54.7 in July. Components of the overall July index from the monthly survey of supply managers were: new orders at 70.5, production or sales at 61.3, delivery lead time at 51.6, inventories at 42.4, and employment at 46.7. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 20,000 jobs, a decline of 6.2% with metal products manufacturers accounting for a large share of the losses,” Goss said.

The August Business Conditions Index for Missouri advanced to 63.0 from July’s 44.7. Components of the overall index from the survey of supply managers for August were: new orders at 73.4, production or sales at 70.5, delivery lead time at 62.5, inventories at 44.1, and employment at 64.2. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 4.000 jobs, a decline of 1.5% with machinery manufacturing accounting for a large share of the losses,” Goss said.

The state’s overall index for August sank to 64.2 from 68.6 in July. Components of the index from the monthly survey of supply managers for August were: new orders at 73.6, production or sales at 71.2, delivery lead time at 63.4, inventories at 44.3, and employment at 68.4. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 2,000 jobs, a decline of 2.0% with metal products producers accounting for a share of the losses,” Goss said.

The August Business Conditions Index for North Dakota sank climbed to 53.6 from 45.5 in July. Components of the overall index for August were: new orders at 70.3, production or sales at 60.8, delivery lead time at 51.0, employment at 43.4, and inventories at 42.3. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 1,000 jobs, a decline of 3.8% with machinery manufacturing accounting for a large share of the losses,” Goss said.

The state’s Business Conditions Index remained above growth neutral in August; however, the overall index declined to 61.8 from July’s 69.0. Components of the overall August index were: new orders at 74.1, production or sales at 72.8, delivery lead time at 65.3, inventories at 44.6, and employment at 52.1.“According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 8,000 jobs, a decline of 5.9% with metal manufacturers accounting for a large share of the losses,” Goss said.

The August Business Conditions Index for South Dakota increased to 62.9 from 61.0 in July. Components of the overall index from the August survey of supply managers in the state were: new orders at 73.3, production or sales at 70.4, delivery lead time at 62.5, inventories at 44.1, and employment at 63.9. “According to U.S. Bureau of Labor Statistics, since the onset of COVID-19, the state’s manufacturing sector has lost approximately 1,500 jobs, a decline of 3.4% with both durable and nondurable goods producers recording losses for the period,” Goss said.

August survey highlights

The regional Business Conditions Index expanded to its highest level in two years.

For the first time since January, the employment index rose above growth neutral.

According to U.S. Bureau Labor Statistics data, the region has lost approximately one million jobs since the onset of COVID-19, for a 7.3% decline, of its non-farm jobs.

Four of five manufacturers reported difficulty in finding and hiring qualified workers.

Business confidence climbed to its highest level since February 2018.