By
NICK GOSNELL
Hutch Post
HUTCHINSON, Kan. — The economy continues to bounce back, according to a survey released Monday by Creighton University economist Ernie Goss. The Mid-America Business Conditions Index continues its stay in a range indicating very strong growth for the next three to six months, but those being surveyed aren't as confident in the long term and Kansas is lagging in one indicator in particular.
"Wage growth is not nearly as strong," Goss said. "In fact, it's ninth in the nine state region. That's simply because Kansas is adding jobs in lower wage sectors."
Goss believes the Federal Reserve is going to have to take some action, or inflation is going to be a big problem.
"They're going to have to cut back on their purchases of mortgage-backed securities," Goss said. "What does that mean? Each month, they are buying $80 billion of U.S. Treasury Bonds, monetizing the debt, buying the debt, supporting government spending. Then, they are buying $40 billion of mortgage-backed securities, which is supporting the housing market. Now, the housing market, in my judgment, doesn't need this much support and $40 billion? They need to cut back right there."
If the fed does not continue the practice, it likely will result in higher long-term interest rates, which means it would cost more to get a mortgage. How much more remains to be seen.
"You keep putting air in that bubble, it's got to go somewhere," Goss said. "It's going to ultimately go up with interest rates, higher prices and/or higher taxes."
The wholesale inflation gauge for the month surged to a record high 98.7 from June’s 98.4, the previous record high.