Unemployment rate puts damper on Midwest economy

? Employment remained weak, but new orders and confidence grew among Midwest manufacturers in May, a survey showed Monday.

The overall index for the Mid-America Business Conditions Survey rose to 55.3 from April’s 53.1, marking its highest level since June of last year, said Creighton University economics professor Ernie Goss, who conducts the survey. The employment index for the region declined to 48.5 from April’s 50.3.

“It is clear that companies are meeting their production and profit targets with the same or fewer employees,” Goss said.

At the national level, business among manufacturers declined for the third consecutive month in May, but at a much slower rate, according to a similar survey done by the Institute for Supply Management.

The national survey showed a manufacturing index at 49.4 percent last month, up from 45.4 in April.

A reading below 50 means manufacturing activity is slowing; above 50 indicates the industry is growing.

Goss surveys business leaders and manufacturers in nine states: Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

Job losses in the region will cease, but unemployment rates may rise slightly in many states until the end of summer, Goss said.

Two factors were the prime reasons for the overall index climbing, Goss said. Those were new orders, which rose to 60.4 from April’s 53.6, and production, which rose to 61.2 from April’s 57.2.

Declines in the value of the dollar have helped businesses, especially those selling in Europe, Goss said.

A successful end to the Iraq war and lower energy prices helped boost confidence among supply managers and business leaders, Goss said. May’s confidence index climbed to 63.3 from April’s 59.5, he said.

However, much of the recent strength has been in nondurable goods manufacturing and in services, Goss said. Even there, much of the upturn was achieved with current employees working longer hours, he said.

Durable goods manufacturers have yet to experience any significant improvements since the recession began, Goss said. Since peaking in 1998, manufacturing employment in the region has declined by more than 220,000 or over 13 percent, Goss said.

The May inventory index of 49.2 also indicates that businesses continue to reduce inventories to add to profits, Goss said.

The index that tracks prices paid for raw materials and supplies dropped to its lowest level since December 2002 at 58.6, Goss said.

“As a result of lower oil prices, businesses are reporting reduced inflationary pressures,” Goss said.

Lower inflation will provide the Federal Reserve Board with the flexibility to move lower on interest rates at its June meetings, Goss said.