Welcome to our June report covering Creighton's May survey results. The survey of bank CEOs in 10 Rural Mainstreet states indicates areas of the country dependent on farm/energy income are experiencing improving growth while our more urban-based survey of supply managers in nine Mid-America states indicates the economy is growing at a healthy pace and with positive projections.
| From the Desk of Ernie Goss
Cutting Coal Electricity Generation:
More Costly for Red States
This month under provisions of the Clean Air Act, signed by Richard Nixon in 1970, President Obama proposed new carbon limits on electricity generation. The goal of his initiative is a 30 percent reduction of carbon emissions from electricity plants by 2030, three-fourths which come from coal usage.
The latest data from the Energy Information Agency show that residential electricity customers in the 25 states generating electricity from coal pay 20 percent less per kilowatt hour than customers in the 26 states and DC that use no coal in the production of electricity.
Furthermore, 11 of the 12 highest electricity cost states use no coal in the making of electricity.
Data indicate that reducing coal's share of electricity production (from a national average of 28.3 percent to 20.0 percent) by expanding the share produced by renewable energy will increase the cost of electricity by approximately 19 percent. However, this increase in cost will not be shared evenly.
Blue states, those that placed their electoral votes for the Democrat presidential candidate in each of the last four elections, paid electricity prices 43.2 percent higher than states that voted Republican in the same four elections. Not surprisingly, 16 of the nation's 19 Blue states used no coal for electricity creation, while only 5 of 22 Red states used no coal for electricity production.
Purple states, those that split their electoral votes between Democrat and Republican presidential candidates, paid 23.3 percent more for electricity production than Red states, and 5 of the 10 Purple states use no coal in the generation of electricity.
Thus in addition to environmental and health concerns, the new policy interjects potential political issues into the President's announced policy.
Read more articles on Professor Goss' blog Economic Trends.
Mid-America & Rural Mainstreet Indicators Graph
| Mid-America Region
Healthy Growth Ahead for Mid-America Economy:
Supply Managers Expect Strong 2014 Hiring
View full report.
June 2014 Mid-America
May survey results at a glance:
- Leading economic indicator highest in more than three years.
- Employment index highest level in more than one year.
- More than four of 10 firms expect upturn in hiring for rest of 2014.
- Only one of 10 firms anticipates layoffs for remainder of 2014.
- Wholesale price gauge down for month but up from same time last year.
| Rural Mainstreet
Economy Strengthens in May: 90 Percent of Bank CEOs Support Keystone XL Pipeline
May survey results at a glance:
- Rural Mainstreet Index rises for a third straight month indicating modest growth.
- Farmland prices decline for sixth straight month.
- More than 90 percent of bank CEOs support completion of construction of the Keystone XL pipeline.
- Almost half the bankers indicated that the lack of fast broadband access for businesses in their area was constraining growth.
| The Outlook
Professor Goss expects:
- The U.S. 2014 budget deficit to decline to roughly $500 billion, or 2.8% of GDP.
- The U.S. trade deficit to remain unacceptably high as many of our global trading partners experience slower economic growth thus buying less from the U.S.
- U.S. housing price growth to slow to a more sustainable annual growth rate of 4% - 6% in the next 6 months.
National Association of Business Economics' Summary:
- "NABE's June 2014 Outlook Survey panelists expect stronger economic growth for the balance of this year than they did three months ago," said NABE President Jack Kleinhenz, chief economist of the National Retail Federation. "The consensus forecast is that real GDP will advance at a strong 3.5% annualized clip in the second quarter of 2014, bolstered by activity that was postponed due to adverse weather conditions earlier in the year. The March survey called for a 2.8% second-quarter gain. Growth expectations for the third and fourth quarters of 2014, at 3.1% and 3.2%, respectively, have also been revised upward. The majority view is that the Federal Reserve will terminate its long-term asset purchase program by the end of 2014 and begin to raise the federal funds rate in 2015."
- May surveys of supply managers from Creighton University and the Institute of Supply Management point to improving growth through the third quarter of 2014.
- U.S. employers added 217,000 non-farm jobs in May and the unemployment rate remained steady at 6.3%.
- While the housing market has slowed, automobile sales have moved back to their pre-recession levels and are at their highest level in 9 years.
- While the overall May unemployment rate was 6.3%, it was 11.5% for Blacks, 7.7% for Hispanics and 19.2% for teenagers.
- The number of long-term unemployed for May was unchanged at a "too high" 3.4 million.
- In May, average hourly earnings for all employees on private non-farm payrolls rose by 5 cents to $24.38. Over the past 12 months, average hourly earnings have risen by a puny 2.1% and only slightly above inflation.
Supply Manager Report
* North Dakota
* South Dakota
Read state-by-state, six-month projections by supply managers from nine states surveyed regarding current economic conditions in their communities.
Once again Congressional Democrats and Republicans are bonding to advance bailouts for some of the nation's biggest corporations. This time it is funding for the
Depression era relic, the
The bank hands out loans, capital and credit insurance to support U.S. firm's sales abroad. Last year, the bank's authorizations exceeded $27 billion. Why should the U.S. taxpayers guarantee loans that private lenders reject?
Yield or interest rate
U.S. Treasury Bond:
Instantaneously, you can see the yield on the U.S. Treasury bond at finance.yahoo.com. This yield will rise when (or if) inflation rises. It also falls as global financial risks increase. As Iraq/Ukraine war risks climb, the yield will sink. If yields increase above 3.1% and hold, some of the air will come out of the U.S. stock markets.
On June 17, the Bureau of Labor Statistics releases consumer price indices for May. Monthly increases of more than 0.2% will encourage the Fed to maintain and potentially reduce its monthly bond buying program. It will point to higher long-term interest rates and could even encourage the Fed to
raise short-term interest rates before the end of Quarter 1, 2014.
On July 4,
the U.S. Bureau of Labor Statistics (BLS) will release the employment report for June. Another strong report (job additions above 200,000) will result in long- term interest rates rising more quickly.