A survey of Nebraska business leaders finds the state’s top economic numbers strengthening during July. The Creighton University survey showed an upturn for Nebraska while economics professor Ernie Goss says the Midwest region as a whole had its best gain since August a year ago.
Goss says, “The overall index, which is a leading economic indicator for the nine-state region, rose above growth neutral indicating that this recession, at least in my judgement, is over.” However, Goss says this will likely be a jobless recovery both for Nebraska and for the region. Goss says almost two out of every three the supply managers they surveyed expect more layoffs before the end of the year.
“We may not see any job gains until well into 2010 as the unemployment rate rises,” Goss says. “Our employment gauge was below growth neutral for the month of July, so that certainly wasn’t good and 60-percent of the supply managers indicated that they expect their company to layoff workers in the rest of 2009.” The prices-paid index, which tracks inflation at the wholesale level, was up significantly in July and Goss says that indicates inflation is on the horizon.
He says actions by the Federal Reserve Board over the past year and the federal stimulus package could lead to higher inflation in 2010. “The Fed has increased the money supply, we’ve got a stimulus package out there, a federal stimulus package, that really hasn’t kicked in yet,” Goss says. “When those begin to simultaneously hit the U.S. market, we’re going to see some excessive inflationary pressures.” In order to combat those increased inflationary pressures, he expects the Fed to raise short-term interest rates at either its November or December meeting.
Companies in Nebraska and across the Midwest have not begun to replenish their inventories as show on the survey’s inventory index, which remained below growth neutral. “And of course when that does begin, we’re going to see even more inflationary pressures and again an expansion of the economy,” Goss says. “I think we’re out of the recession certainly in this quarter, the third quarter and the fourth quarter and it’s going to mean more inflationary pressures than the Federal Reserve ever intended.” New export orders remained below growth neutral for the month and the rebounding U.S. economy pushed imports higher, indicating continued weakness among the U.S. trading partners.
“I expect Nebraska’s seasonally adjusted unemployment rate to peak at 5.3 percent, its highest level since 1986, in the fourth quarter of this year,” Goss says. “I don’t expect manufacturing job losses for the state in the second half of 2009. However, I do expect Nebraska to lose non-manufacturing jobs, albeit at a slower pace, for the rest of 2009.”