Recession reaches Mid-America
By WHITNEY PANDIL-EATON, Staff Writer wpandileaton@minotdailynews.comResults of an economic forecast released Monday indicate that North Dakota, South Dakota and Minnesota are beginning to show signs of economic distress.
The Creighton Economic Forecasting Group, overseen by Creighton University economics professor Ernie Gross, uses a national survey to gauge the business conditions of nine states in the Mid-America region. The Business Conditions Index uses the components of new orders, production, delivery lead time, employment and inventories reported by supply managers in the survey to determine an overall index, which ranges from 0 to 100, with a figure greater than 50 indicating an expanding economy over the next three to six months.
North Dakota is one of the last states to feel the economic squeeze. The state's overall index dropped below the growth-neutral (a score of 50) to 49.2 in January, the first time the overall index has dropped below 50 since August 2002. Mirroring South Dakota, durable and nondurable-goods manufacturers dependent on international sale reported slowdowns last month, which will have an impact on employment figures.
"Even though there are more workers employed in North Dakota than ever before, I expect the national economic recession to weigh on the state in the months ahead. I expect the state's unemployment rate, which is now the lowest in the region, to expand by 0.2 percent in the first quarter of 2009 with job losses of less than 1,000," Gross said.
Among the three Upper Plains states, Minnesota has fared the worst. The state's overall business conditions index dropped to a record low of 30.1 in January, down from 32.2 in December, making it the sixth straight month Minnesota's index has been below growth-neutral.
"Weakness was reported by firms across the business spectrum of the state, from durable-goods manufacturing to telecommunications," Gross said.
The steady overall decline has resulted in the highest unemployment rate for the state in nearly 25 years. Gross said he anticipates the rate to reach 8 percent by July.
Similarly to Minnesota, South Dakota's overall index dropped for the fourth month in a row, sinking to a record low of 39.2 for January, down from 42.5 in December and 47.9 in November 2008.
"Until very recently, South Dakota's manufacturing sector had held up much better than manufacturing in the rest of the region," Gross said. "However, heavy manufacturing firms, especially those dependent on sales abroad, are now experiencing significant weakness."
Due to those weaknesses, Gross said he anticipates the state's unemployment rate to reach 4.5 percent by mid-year.
Also detailed in the monthly survey were Nebraska, Iowa, Kansas, Missouri, Arkansas and Oklahoma, painting a broader picture of the grim economic future. The overall index for the Mid-America region plunged for a third straight month, resulting in a record low of 33.0 in December. Adding to the turmoil was the employment index, 34.5 for December, which was the weakest reading recorded since The Creighton Economic Forecasting Group began conducting the monthly survey in 1994.
"This is stacking up to be the (hurricane) Katrina of economic recessions, similar to what the U.S. experienced in the early 1980s, when the national unemployment rate soared above 10 percent. While I expect the downturn for Mid-America to be a bit less steep, it will nonetheless be deeper than that for 2001," Gross said.
