Economist: Midwest recession to rival that of 1981-82 for unemployment

Monday, December 1, 2008 | 12:57 p.m. CST; updated 10:47 a.m. CST, Wednesday, February 11, 2009

OMAHA — A Nebraska economist says he sees signs that the regional recession will rival the 1981-82 recession for unemployment.

Professor Ernie Goss of Creighton University said the primary index from his Mid-America Economic Survey, which includes Missouri, has plunged to its second record low in as many months. The November index hit 37.8 in November, down 2.1 percentage points from October.

Any score below 50 on the index, which ranges between 0 and 100, indicates a contracting economy over the next three to six months.

"These readings are much lower than those recorded before and during the 2001 recession," said Goss in a news release late Sunday. "The regional economy is now in a recession, and I expect it to rival the recession of 1981-82 in terms of joblessness and job losses."

States in the survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The survey index on confidence, which looks ahead six months, also hit a record low in November, 22.4, compared with 22.8 in October.

"Despite very forceful action by the U.S. Treasury and the Federal Reserve, the business confidence index has been below 40.0 for all of 2008, reflecting an economic outlook that is at its lowest level since we began the survey in 1994," said Goss.

The November employment index dropped to 39.0 from 47.4 in October.

"I expect regional job losses to mount in the months ahead with rapidly rising unemployment rates for most states," Goss said.

The index's gauge of wholesale inflation plummeted to 49.6, its lowest level since the 2001 recession. The October figure was 61.6 and 84.0 in September.

"The swift decline in the prices-paid index is a result of weakening regional, national and global economies and a strengthening U.S. dollar," Goss said. "Despite the Federal Reserve's very aggressive interest rate cuts and increases in the money supply, I expect downturns in oil prices and global economic activity to continue to place downward pressure on inflation at the wholesale level in the months ahead."

The survey report carried more weak trade numbers.

For the fifth month in a row, new-export orders dropped. The November reading was a record low of 36.8, down 2.6 percentage points from the previous low of 39.4 in October.

And the imports index slumped for the fourth month in a row, according to the report.

Other components of November's overall index:

  • new orders at 30.4, down from 32.8 in October;
  • production at 35.4, down from 38.1;
  • inventories at 45.0, down from 47.4;
  • and delivery lead time at 50.2, down from 52.2.

The Creighton Economic Forecasting Group has conducted the monthly survey since 1994.

The Institute for Supply Management, formerly the Purchasing Management Association, began to formally survey its membership in 1931 to gauge business conditions. The Creighton Economic Forecasting Group uses the same methodology as the national survey.

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