Iowa Public Television

 

Creighton Researcher Takes Economic Pulse of Rural America

posted on September 4, 2009


In order to view this video, you must install Microsoft Silverlight

This video player uses Microsoft Silverlight.

Labor Day weekend may bring a welcome vacation for millions of Americans but new government figures signal nearly one-tenth of the U.S. workforce is on an "extended break."

The Labor Department reported this week that employers shed 216,000 jobs in August – lower than previous estimates and the smallest monthly figure in the past year.

Workers losing their jobs and settling for part-time work also known as the "underemployed," rose to 16.8 percent – the highest rate in 14 years.

The overall unemployment rate jumped to 9.7 percent – rising one-tenth of a point from last month. The nearly 10 percent jobless rate is the highest since the early days of the Reagan Administration 26 years ago.

On Inauguration Day, America's 44th President proclaimed he would breathe life into an economy mired in the worst recession since World War II. And in the ensuing months, President Obama authorized more than $1 trillion in federal spending and tax breaks to stimulate the economy and preserve a floundering financial sector.

While the vast majority of stimulus funds have yet to be distributed, most analysts are cautiously optimistic about prospects for recovery -- perhaps as early as this year.

However, Rural America is watching the recovery, thus far, from the sidelines.

And as Paul Yeager reports, no one knows that better than the chair of the Creighton University Economics Department, Ernie Goss.

For the past 15 years, Ernie Goss and the Creighton Economic Forecasting Group have published a monthly study of Midwest economic conditions known as the "Business Conditions Index for Mid-America."

Hoping to assess economic vitality in the "Heartland," researchers survey bank CEOs and nearly 1,000 purchasing managers.

Ernie Goss/Creighton University Economist: "These are the men and women at the front line of the economy. If they're buying, that soon spills over into the economy. That's the theory behind it. Its a leading economic indicators. We've been doing it for, since 1994. We get a good beat on the economy. And during that time we've had two recessions, we picked them both up in advance."

The "Business Conditions Index" is compiled from surveys conducted in nine Midwestern states. The finished product is emailed to 5,000 recipients -- each with different perspectives and interests.

Terry Moore is president of the Omaha Federation of Labor AFL CIO and a Bank Officer for the Federal Reserve Bank of Kansas City. He reads Goss' survey and sources the data in reports to the Reserve Bank board.

Terry Moore/Omaha, NE/AFL-CIO: "That research that is right to the point to very hot, news, that they don't have yet. When were talking to a car dealership, were getting his reports of this week, and were talking about the transportation of goods we're getting them as of today. When we talk about the railroad, or furloughs, which they would not have any of that information, or the idea of that, so were going to give them information that hasn't even been done yet, ‘cause we know this layoff is happening in the next to-two weeks, hiring is happening in the 2-3 days, or whatever may be."

This month's survey asked supply managers 9 basic questions about production orders, exports and inventory

Creighton University graduate students compile survey results into charts and graphs. Goss then meets with researchers, faculty colleagues, and even Federal Reserve Board representatives to analyze and interpret the data.

Brooke: "A lot of them are hoping for a turnaround by October.

Tony Hendrickson: "Are they the forbearers to a double decline recession? Where it goes down and back up, then goes down again. Are we the harbor of something to come, or are we following a trend and lagging behind?"

Factors weighing heavily on the rural economy are readily apparent. As researchers analyze August data, the discussion quickly turns to the farm economy.

Hendrickson "Prices are going to rebound, negative effect on production of ag products.

Goss: "Then how much of this is ag related? Income down 25%. If you look at the rural survey, banks, not good. Seeing farm equipment sales not doing well at all, that's spilling out over to the Main Street survey.

Hendrickson "I think that explains an effect in downed retail sales. As the ag economy tends to be more cyclical, more recessions, more cutbacks and problems, in our history, different from than regular recession, I think people in rural areas have learned to say, times are hard, they stop spending. They respond with cutbacks in spending much quicker than the rest of the economy because they're more used to downturns." Whether its negative or positive, its right on the border, its not that positive.

In August, the "Business Conditions Index for Mid-America" fell to 48.4 from July's 51.7 and June's 49.3... a troubling development since it represents the first decline since January.

A reading above 50 indicates economic growth, and anything below 50 signals a shrinking economy.

The lowest number ever tallied on the index was last December's 33.

While government numbers on the broader economy have shown signs of improvement in recent months, Goss says conditions in Mid-America are not recovering as quickly.

Goss: "Its crawling out of the recession, and it is crawling, we've really reached some, put out there scary numbers back in January and February as the President had said, 2615 its been inching up each month. The negatives have been less negative, you look at this recovery according to our survey, versus recovery in 2002, after the recession of 2001, this is not a recovery you like to see, like to see more robust recovery."

Goss claims significant pullback in farm income is now reaching businesses with ties to the farm sector.

Goss: "Ag is really underpinning this economy, and I think it has a lot to do with ag income which is down 25%"

In addition to a 25 percent decline in farm income this year, Goss claims a strengthening dollar portends more bad news for the highly trade-sensitive industry of agriculture.

Goss: "Farm products from this part of the country got higher in price in Asia, higher price in Europe, all of a sudden our farm sector wasn't as competitive as it was previously. I'm bullish on the farm sector because the dollar is going to weaken and this will favor Ag, we will see biofuels and alternative energy have some positive impacts think its been overstated a bit."

Goss: "Unfortunately, the last thing we see is jobs."

Release day is somewhat tense for Goss. Since he publishes his regional report the same day as a similar, national study is released, the Creighton economist pours over the numbers for accuracy and -- hopefully -- developments also found in the broader economy. But this month, his survey doesn't match the national trend.

NewsHour with Jim Lehrer/9.1.09: "The selloff came despite reports that US manufacturing grew in August for the first time in 19 months."

Goss: "Maybe I'm becoming too hung up on the numbers, but when you look at the rural bankers, the bank CEOs, and I'm putting it together, because that one was running upward and boom and started to go down. Now this going down, you're like, what's going on. And you got to think it has something to do with farm income. Because the rest of the nation is crawling out."

So what does Goss see when he gazes into the cystal ball?

Goss: "Overall farm income, this window we're looking at right now, just not that good. Now showing up in our surveys. Manufacturing still is not doing well. Food processing which is tied to ag, that's holding up pretty well. That's really important to this part of the country."

Bearish sentiments aside, it may be wise to remember the old adage that "one month does not a trend make."

 


Tags: economy news research rural