Midwest economy slows as labor shortages take toll

The Midwestern economy slowed in March after hovering around growth-neutral for the last three months, according to Creighton University’s Rural Mainstreet Survey.

The Rural Mainstreet Index, which tracks bank CEO sentiments in rural areas of a 10-state region, fell five points to 45 from 50 in February. According to the report, the economic confidence index fell five points to 39 as bankers reported weakening economic conditions, higher borrowing costs and continued labor shortages.

“The Rural Mainstreet economy continues to experience slow, to no, to negative economic growth,” said Ernie Goss, Jack A. MacAllister chair in regional economics at Creighton University’s Heider College of Business. “Less than 1 percent of bankers reported improving economic conditions for the month with 92 percent indicating no change in economic conditions from February’s slow growth.” 

 Farm prices remain strong, having grown by more than nine percent last year and remaining above growth-neutral for 30 straight months, according to the report. CEOs expect farmland prices to increase by only 1 percent over the next 12 months. The index for farm equipment sales increased seven points to 59. Only 13 percent of bankers expect farm credit standards to tighten.

Bank savings deposits increased to a record level last year, according to the report. March’s loan volume index increased 15 points to 63. The index for checking-deposits increased two points to 40, while the index for certificates of deposits and other savings instruments increased 18 points to a record-high of 75.

Other findings included:

  • The index for new hiring increased three points to 48 as labor shortages continued. 
  • The index for home sales fell one point to 36. “This is the 10th straight month that the home-sales index has fallen below growth-neutral,” Goss noted. “An almost doubling of the 30-year mortgage rate over the past year and low inventory levels slowed home sales in the region over that time period.” 
  • The index for retail sales fell nine points to 41.