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Production decline slows in nation's midsection
Minnesota's "business conditions index" was below the regional average.
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The manufacturing sector in the nation's midsection contracted in June, but a survey released Wednesday indicated that the regional economy likely is bottoming out.
"The negatives are getting less negative," said Ernie Goss, an economist at Omaha's Creighton University, which conducts the nine-state survey of supply managers.
The "business conditions index" rose for the sixth straight month, but even with that improvement, the manufacturing sector still wasn't growing. June's 49.3 measure falls below the 50 mark, above which the sector is growing. The June index was better than the 46.6 index in May and 42.7 measured in April. The monthly index, which includes inputs such as new orders, inventories and employment, is moving closer toward blasting above the 50 that would indicate growth.
Goss said that he anticipates the mid-American economy to exit the recession by the end of the fourth quarter, but he doesn't envision job creation until 2010.
In Minnesota, the business conditions index for June was 43.9, below the regional average. Minnesota had a higher performance rating than Arkansas, Kansas and South Dakota, but it ranked below Iowa, Missouri, Nebraska, North Dakota and Oklahoma.
"Minnesota has a larger durable-goods sector," Goss said. "That has been hit more heavily."
He estimated that Minnesota's unemployment rate will top out in the third quarter at 8.5 percent.
In mid-June, the Minnesota Department of Employment and Economic Development reported that the state's unemployment rate rose to 8.2 percent in May.
Minnesota lost 10.3 percent of its manufacturing jobs, or 34,800 jobs, for the 12 months ending in May.
The manufacturing sector has lost more jobs than any other segment of Minnesota's economy.
While the unemployment rate has taken "a fairly fast trek upward," Goss projected that it will decline at a much slower pace. He expects Minnesota's unemployment rate to drop below 8 percent somewhere near the end of the first quarter or the start of the second quarter of 2010. Companies "are just not anxious to take on new workers until they know revenue increases are permanent," he said.
The Institute for Supply Management, which conducts a national survey, announced Wednesday that the U.S. manufacturing sector didn't grow for the 17th consecutive month. But that business index climbed from 42.8 in May to 44.8 in June.
Norbert Ore, chairman of the survey committee, saw some signs for optimism, despite the fact the index for new orders fell from 51.1 in May to 49.2 in June.
"Aggressive inventory reduction continues," Ore said in a statement. "Indications are that the de-stocking cycle is at or near the end in most industries."
Liz Fedor • 612-673-7709
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