Business index moves into positive territory

For the first time since last August, a survey of business supply managers in nine Midwestern and Plains states, including Nebraska, moved into positive territory in July.

It was the seventh straight month that the Business Conditions Index advanced, leading Ernie Goss, the Creighton University economics professor who conducts the study, to say the regional economy “is on the mend.”

A score above 50 indicates growth. Nebraska and four other states reported conditions above 50. Iowa slipped back below 50 after breaking above the halfway point in June.

Nationally, July marked the 18th straight month of decline in the manufacturing sector, according to a report released Monday by the Institute for Supply Management.

But the pace of the decline slowed compared with June, and two major components “rose significantly above 50 percent, thus setting an expectation for future growth in the sector,” the report said.

Those components were new orders and production.

“If we stay on trend ... we would expect to be above 50 next month,” said Norbert Ore, chairman of the institute's survey committee.

But the positive news doesn't necessarily mean job growth or employment for those who lost their jobs in the recession.

Goss said he expects little or no job growth the rest of this year. In fact, he said, 60 percent of the supply managers interviewed expect more layoffs this year.

Similar predictions by economists across the country have led to speculation that there will be a “jobless recovery” from the recession.

“Clearly the job market has been and will continue to be much weaker than the overall economy,” said Goss, who is director of Creighton's Economic Forecasting Group.

It's hard to predict when employers will start hiring again, Goss told The World-Herald, but he offered some hope of job growth in Nebraska yet this year.

Real job growth at the national level is unlikely until well into 2010, he said.

“Given the uncertainty surrounding the economy right now, in terms of health care, cap-and-trade, the minimum wage going up and other real changes that these companies are having to deal with,” he said.

“Nebraska could be a little more positive,” Goss said.

The cheaper dollar could help export manufacturers like Valmont Industries of Omaha, which makes irrigation equipment, transmission line towers and lighting standards.

“I think we could see some job growth in Nebraska — it would be very slight — in 2009.”

Iowa, already hard hit with a loss of manufacturing jobs, will continue to lose jobs, but the pace will slow in the coming months, according to the report.

The report forecast that unemployment rates will peak in both Nebraska, at 5.3 percent, and Iowa, 6.5 percent, in the fourth quarter of this year. Those rates would be the highest since 1986.

Iowa slipping back below the neutral level of 50 on the Business Conditions Index didn't greatly concern Goss.

“It's still up there,” he said. “If you map it out it's trending higher.”

Goss said managers still were cutting inventories last month, but he expects them to replenish the merchandise on their shelves in the second half of this year. That's another positive step for the economy.

Three components of the region index rose: New orders hit 58.3, the highest since September 2007; production or sales reached 58.7; and delivery lead time 53.

Economic optimism declined but still was a solid 62.8.

The prices-paid index, which tracks the cost of raw materials and supplies, rose to 61.5 from 52.5, causing Goss to express concern about inflation rising by the middle of next year.

The Federal Reserve will not raise rates in time to “thwart excessive inflation surfacing in 2010,” he said.

Contact the writer:

444-1081, virgil.larson@owh.com