HAYS, Kan. - National economic indicators may signal the end of the recession, but here in the Midwest and specifically in Kansas, the job market is teetering. Companies are still laying off workers. New data shows communities reliant on the farm economy may be the last to rebound.
The November Business Conditions Index for the Mid-America region, a leading economic indicator from a survey of supply managers in a nine-state area, slumped to its lowest level since May of this year. The index stood at 47.5, which was down from October's 51.8 and September's much healthier 56.2. An index of 50.0 is considered growth neutral.
The leading economic indicator for Kansas sank from October's reading. The November Business Conditions Index, based on a survey of Kansas supply managers, stood at 42.1, down from October's 50.0.
Rebounding prices have accompanied job losses for the region. After rising to growth neutral for October, the employment index sank to 46.1.
"This month's plunge below growth neutral raises the possibility of a double-dip recession for the region. The significant decline in farm income for 2009 continues to weigh on firms with strong ties to agriculture. For example, agriculture-equipment manufacturers have been hard hit by farmers' reluctance to purchase new equipment. This downturn has been particularly significant for rural areas of the region," Creighton University Economics Professor Ernie Goss explained.
Supply managers in the nine-state region continue to reduce inventories. The mid-Ameria region includes Arkansas, Kansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Oklahoma. November survey results at a glance:
- Business conditions index drops to its lowest level since May.
- Inflation gauge indicates increasing price pressures in the pipeline.
- Only 12 percent of firms reported an increase in employment, while 19.5 percent indicated their firms reduced jobs.
- Over 41 percent of supply managers expect layoffs in the months ahead, and only 48 percent anticipate a pay increase in 2010.
- Minnesota and Oklahoma were the only states with an increase in leading indicator.
Consistent with a weak economy, trade numbers were once again anemic. New export orders inched higher to 50.0 from 49.3 in October, while imports sank to 47.8 from October's 50.7. "The weaker U.S. dollar that is making imported goods more expensive is contributing to the decline in goods purchased from abroad and rising inflation pressures," said Goss.
In Kansas, components of the November downturn were new orders at 44.7, production or sales at 42.5, delivery lead time at 41.1, employment at 47.4, and inventories at 40.9.
"The global recession and rising productivity have reduced manufacturing employment by more than 25,000 or 13.5 percent over the past year. I expect the pace of these job losses to slow in the months ahead as a cheaper dollar stimulates the sale of Kansas manufactured goods and agricultural commodities abroad," said Goss.
The Institute for Supply Management, formerly the Purchasing Management Association, began formally surveying its membership in 1931 to gauge business conditions.
The Creighton Economic Forecasting Group, of which Goss also is director, uses the same methodology as the national survey to consult supply managers and business leaders. The overall index ranges between 0 and 100. Growth neutral is 50, and a figure greater than 50 indicates an expanding economy over the next three to six months.
The group has conducted the monthly survey of supply managers in nine states since 1994 to produce leading economic indicators for the regional economy. States in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
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