Mid-America index soars to 16-year high; almost 8 of 10 manufacturers reported worker shortages

For the fifth straight month, the 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 since 2004.

The October Business Conditions Index, which ranges between 0 and 100, increased to 70.2 from September’s 65.1. In April of this year, COVID-19 pushed the overall index to its lowest level in 11 years. Since April, the overall index has risen six consecutive months with five straight months above growth neutral 50.0.

“Creighton’s monthly survey results have mirrored the national manufacturing survey results indicating that the manufacturing sector has been expanding at a very healthy pace since sinking to a post-2008 recession low in April. Even so, current output in the regional and U.S. manufacturing sectors remains below pre-COVID-19 levels. More than three of four supply managers reported negative COVID-19 impacts,” 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.

Employment

The regional employment index moved well above growth neutral for October to its highest level in more than two decades, climbing to 66.7 from 61.8 in September. Prior to COVID-19, the insured unemployment rate for the region stood at 1.3%. It reached a high of 11.0% in May and has fallen to 2.9% in October.

Almost eight of 10, or 78.6% of supply managers reported shortages of qualified workers to fill open positions at their firms in October. As stated by one supply manager, “Very competitive for entry level staff and company is having to adjust scale wages.”

Other comments from October survey participants include:

“Very difficult to predict economy. Need to remain flexible; manage risks; and respond quickly to changes.”

“Workers do not want to do physical labor anymore.”

Economic key points

The wholesale inflation gauge for the month rose to 76.8 from 71.5 in September.

Said one supply manager, “Raw material (steel) is getting in tight supply, so prices are on the rise.”

“Though inflationary pressures have risen over the last several months, the Federal Reserve remains comfortable with current ultra-low short-term interest rates. In recent meetings of the rate setting committee, the FOMC, the committee indicated it will likely keep short-term interest rates at near record lows well into the future even as inflation ticks up above their target,” Goss said.

Looking ahead six months, economic optimism, as captured by the October Business Confidence Index, climbed to a very strong 70.4 from 69.4 for September.

“An expanding manufacturing sector, the federal stimulus plan, and the Federal Reserve monetary incentive programs supported October’s very healthy confidence index,” said Goss.

The regional inventory index for September, reflecting levels of raw materials and supplies, rocketed to 66.8 from last month’s 45.6.

The regional trade numbers were higher for the month, with new export orders rising to 58.4 from September’s 50.0. An expanding domestic manufacturing sector supported a solid import index at 59.5, up from September’s 56.0.

New orders were at 76.2, down from 79.4 in September; the production or sales index expanded to 73.3 from 72.1 in September; and the speed of deliveries of raw materials and supplies index at 68.4 up from last month’s 66.7, indicating slower deliveries for October.

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 summaries

The October Business Conditions Index for Arkansas fell to 64.4 from September’s 68.5. Components from the October survey of supply managers were: new orders at 75.5, production or sales at 72.4, delivery lead time at 63.4, inventories at 48.5, and employment at 62.1. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood a 0.9% in the second week of March, peaked at 11.7% in the third week of May, and fell to 1.8% in the third week of October,” Goss said.

Iowa’s Business Conditions Index remained above growth neutral for October. The reading climbed to 78.7 from 67.1 in September. Components of the overall October index were: new orders at 82.1, production. or sales at 71.2, delivery lead time at 69.3, employment at 80.9, and inventories at 93.4. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 1.7% in the second week of March, peaked at 12.4% in the first week of May, and fell to 2.6% in the third week of October,” Goss said.

The Kansas Business Conditions Index for October increased to 68.7 from 63.0 in September. Components of the leading economic indicator from the monthly survey of supply managers were: new orders at 76.9, production or sales at 74.1, delivery lead time at 68.6, employment at 66.1, and inventories at 58.0. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 0.7% in the second week of March, peaked at 14.6% in the third week of May, and fell to 4% in the third week of October,” Goss said.

The October Business Conditions Index for Minnesota soared to 82.7 from 55.9 in September. Components of the overall October index were: new orders at 81.4, production or sales at 79.4, delivery lead time at 85.0, inventories at 88.5, and employment at 78.9. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 2.3% in the second week of March, peaked at 14.9% in the second week of May, and fell to 4.2% in the third week of October,” Goss said.

The October Business Conditions Index for Missouri advanced to 78.0 from September’s 74.4. Components of the overall index from the survey of supply managers for October were: new orders at 84.6, production or sales at 83.2, delivery lead time at 78.8, inventories at 55.6, and employment at 87.9. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 0.8% in the second week of March, peaked at 9.5% in the third week of May, and fell to 1.9% in the third week of October,” Goss said.

Nebraska’s overall index for October jumped to 71.4 from 62.9 in September. Components of the index from the monthly survey of supply managers for October were: new orders at 77.8, production or sales at 75.1, delivery lead time at 71.7, inventories at 63.9, and employment at 68.6. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 0.5% in the second week of March, peaked at 11% in the fourth week of May, and fell to 3.2% in the third week of October,” Goss said.

The October Business Conditions Index for North Dakota climbed to 59.0 from 55.6 in September. Components of the overall index for October were: new orders at 72.7, production or sales at 69.1, delivery lead time at 53.2, employment at 54.2, and inventories at 45.6. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 1.5% in the second week of March, peaked at 9.7% in the first week of May, and fell to 1.3% in the third week of October,” Goss said.

The state’s Business Conditions Index remained above growth neutral in October. The overall index advanced to a strong 61.1 from September’s 58.6. Components of the overall October index were: new orders at 72.4, production or sales at 68.7, delivery lead time at 52.2, inventories at 58.9, and employment at 53.5. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 1.1% in the second week of March, peaked at 9.6% in third week of May, and fell to 3.8% in the third week of October,” Goss said.

The October Business Conditions Index for South Dakota climbed to 71.2 from 59.9 in September. Components of the overall index from the October survey of supply managers in the state were: new orders at 77.7, production or sales at 75.0, delivery lead time at 71.4, inventories at 63.4, and employment at 68.3. “Validating a rapidly improving state economy, U.S. Department of Labor data indicate that the state’s insured unemployment rate stood at 0.6% in the second week of March, peaked at 9.7% in the fourth week of May, and fell to 1.0% in the third week of October,” Goss said.

October survey highlights:

• The regional Business Conditions Index expanded to its highest level in 16 years.
• Almost 78.6% of supply managers reported shortages of qualified workers to fill open positions at their firms in October.
• Very strong export and import readings for the month.
• Employment gauge soared to its highest level in more than two decades.
• More than three of four supply managers reported negative COVID-19 impacts.