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Industry Trends & Iowa’s Economy 

Dave Swenson

Department of Economics

• Nationally – The pandemic did unprecedented short‐term and, we suppose, longer‐term damage to the U.S. economy. Some industries fared better than others. Some geographies did as well.

• State – Iowa’s economic experiences both tracked and diverged from the national pattern. 

• Labor – The pandemic damaged the nation’s labor force; what that means for Iowa is not well understood of yet.

• Outlook – Huge wildcard. Depends on where we were pre‐pandemic, what the pandemic has altered, and what opportunities emerge

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The pandemic job decline was harsh

Massive increase in unemployment and collapsing business activity required unprecedented action at the federal level

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The objective of federal spending was to sustain firms and households and prevent economic collapse

• Payments to individuals

• Emergency unemployment assistance / unemployment assistance to proprietors (gig workers)

• Paycheck protection program

• Huge flow of funds to corporations considered essential or who were hardest hit

• Additional resources for small businesses

• S&L government support

• And initial pandemic public health outlays

These programs prevented further economic collapse and helped maintain households and firms:

Real Personal Expenditures

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Followed by 2nd and 3rd rounds of pandemic relief

• Round 2 in late 2020: Additional assistance to individuals, the unemployed, re‐opened the PPP, rental assistance, small business loans, and more

• Rounds 3 and more are products of the American Rescue Plan– Enhanced vaccination and public health spending

– Additional aid to individuals

– Child Care Tax Credit

– Relief for landlords and renters

– Aid to S&L governments

– Programs focused on public education reopening 

Robust government spending on households also sharply reduced poverty levels

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Federal spending, coupled with pronounced public health interventions have allowed for a robust recovery to date: Real GDP

In terms of job loss, here’s how we compare to previous recessions: The “very scary” graph

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Longer term job consequences vary widely

Minority workers are more likely to work in sectors that have highest job losses

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While nonfarm jobs have persistently recovered, the U.S. labor supply effectively stopped recovering a year ago

What about inflation?

175

195

215

235

255

275

295

Jan2010

Jan2011

Jan2012

Jan2013

Jan2014

Jan2015

Jan2016

Jan2017

Jan2018

Jan2019

Jan2020

U.S. Consumer Price Index(1982‐1984 = 100)

U.S. cities monthly data, all items

12 month moving average0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

1/4/2021 2/4/2021 3/4/2021 4/4/2021 5/4/2021 6/4/2021 7/4/2021

Percent

10 Year Treasury Note Yields

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National Summary

• Economy was harmed by the pandemic

• It has recovered substantially but has a long way to go

• Government spending prevented an economic catastrophe 

• Differential outcomes by industry

• Differential outcomes by race

• Differential outcomes by region

• GDP recovery has been robust

• Recovery of all lost jobs is still a long way away

• Job destruction will also take a while to undo

• Will pandemic resurgence slow national recovery?

• Aha, but what about inflation?

Iowa’s Situation

• Where were we prior to the pandemic?

• What happened during the initial downturn?

• Post‐crash outcomes and prospects

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Iowa: nonfarm jobs

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

1.08

1.10

1.12

1.14

Jan2011

Jan2012

Jan2013

Jan2014

Jan2015

Jan2016

Jan2017

Jan2018

Jan2019

Iowa and Neighboring States Payroll Job Growth, January 2011 = 1.0

Illinois Minnesota Missouri Nebraska South Dakota Wisconsin Iowa

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31-33 Manufacturing 12,400

48-49 Transportation and warehousing 3,686

62 Health care and social assistance 2,127

55 Management of companies and enterprises 1,609

52 Finance and insurance 1,317

11 Agriculture, forestry, fishing and hunting 1,271

54 Professional and technical services 1,049

71 Arts, entertainment, and recreation 897

72 Accommodation and food services 718

53 Real estate and rental and leasing 522

21 Mining, quarrying, and oil and gas extraction 211

22 Utilities ‐261

42 Wholesale trade ‐534

61 Educational services ‐750

81 Other services, except public administration ‐1,155

51 Information ‐1,254

56 Administrative and waste services ‐1,887

23 Construction ‐2,668

44-45 Retail trade ‐7,504

Iowa Payroll Employment Change, 2016‐2019 by Major Industrial Sector

21 Mining, quarrying, and oil and gas extraction 9.7%

55 Management of companies and enterprises 8.4%

48-49 Transportation and warehousing 6.5%

11 Agriculture, forestry, fishing and hunting 6.4%

31-33 Manufacturing 5.8%

71 Arts, entertainment, and recreation 4.4%

53 Real estate and rental and leasing 3.6%

54 Professional and technical services 2.0%

52 Finance and insurance 1.4%

62 Health care and social assistance 1.1%

72 Accommodation and food services 0.6%

42 Wholesale trade ‐0.8%

81 Other services, except public administration ‐2.6%

61 Educational services ‐2.7%

56 Administrative and waste services ‐2.8%

23 Construction ‐3.3%

22 Utilities ‐4.0%

44-45 Retail trade ‐4.1%

51 Information ‐5.5%

Iowa Payroll Employment Percentage Change, 2016‐2019 by Major 

Industrial Sector

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We decompose job change in terms of national growth, industrial mix, and competitive performance

Expected growth at national rate 63,263

Growth due to industrial mix ‐1,570

Growth due to competitive share ‐51,899

Actual Change, 2016‐2019 9,794

Decomposing Iowa's Growth, 2016 ‐ 2019

23 Construction ‐11,917

62 Health care and social assistance ‐10,899

72 Accommodation and food services ‐5,807

44-45 Retail trade ‐4,947

48-49 Transportation and warehousing ‐4,928

56 Administrative and waste services ‐4,385

54 Professional and technical services ‐3,061

81 Other services, except public administration ‐2,803

61 Educational services ‐2,467

52 Finance and insurance ‐1,920

51 Information ‐1,676

71 Arts, entertainment, and recreation ‐839

42 Wholesale trade ‐811

53 Real estate and rental and leasing ‐594

22 Utilities ‐211

21 Mining, quarrying, and oil and gas extraction ‐9

55 Management of companies and enterprises 97

11 Agriculture, forestry, fishing and hunting 1,213

31-33 Manufacturing 4,066

Sectoral Contributions to Iowa's Competitive Share Deficit, 2016‐

2019

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Iowa’s pandemic compared to the nation

Initial sectoral job impacts and current impacts

Leisure & Hospitality ‐46%

Other Services ‐17%

Retail ‐13%

Education and Health Svcs ‐13%

All Nonfarm ‐11%

Information ‐9%

Professional & Business Svcs ‐7%

Durable Mfg ‐5%

Government ‐5%

Nondurable Mfg ‐5%

Trans., Warehouse, & Util. ‐4%

Wholesale ‐3%

Financial Activities ‐2%

Iowa Job Declines, February ‐ April 2020Information ‐14%

Leisure & Hospitality ‐13%

Education and Health Svcs ‐8%

All Nonfarm ‐4%

Durable Mfg ‐4%

Trans., Warehouse, & Util. ‐3%

Wholesale ‐3%

Professional & Business Svcs ‐3%

Government ‐3%

Other Services ‐3%

Retail ‐2%

Financial Activities 0%

Nondurable Mfg 1%

Iowa Job Deficits, February 2020 to June 2021

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Leisure & Hospitality29%

Education and Health Svcs28%Government

12%

Durable Mfg7%

Professional & Business Svcs6%

Retail4%

Information4%

Trans., Warehouse, & Util.3%

Wholesale3%

Other Services3%

Financial Activities1%

Distribution of Remaining Job Deficits by Industry Comparing February 2020 with June 2021

Iowa’s biggest issue is labor supply

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And Iowa’s labor supply issue has diverged from the national pattern

Iowa Summary

• Iowa mimicked the national pandemic experience, though not contracting as much.

– Some sectors were pandemic immune (e.g., ag and ag linkages)

– And the pandemic drove up demand for food goods

– IA is not a tourism destination – leisure and hospitality losses were smaller fractions of the state’s economy

• IA’s nonmetros were affected slightly less than the metros

• IA’s labor force contraction is stark and will inhibit recovery

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Iowa’s Labor Situation

• As of last release, compared to February 2020– We have 73,800 fewer labor force members 

– We have 92,300 fewer employed Iowans

– We have 16,500 more unemployed Iowans 

– And 68,200 fewer nonfarm payroll jobs

• Concerning: Half of the improvement in Iowa’s unemployment rate since April of 2020, has been due to labor force exits

• Understanding who exited and why is important to anticipating Iowa’s potential for recovery

Who’s left the labor force?

• We can suppose they were

– Parents (likely a woman) saddled with child care or remote education responsibilities

– People who had difficulty obtaining unemployment assistance

– Those for whom COVID posed a high risk

– Those whose jobs were in sectors with high transmissibility

– Those close to retirement decided instead to retire

– Those who died or were otherwise affected by the disease

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Outlook

• Iowa’s job economy was slow‐to‐no growing before the pandemic, and has grown <0.01% since October 2020 – U.S. growth of ~ 1.4%

• Durable goods manufacturing has lagged. It will depend in large part on overall U.S. recovery.  Nondurables are capitalizing on pandemic‐related shifts in demand

• IA’s ag economy is in good shape, having benefitted from strong subsidies over the past 3 years coupled with robust prices

• Much of the higher‐end non‐ag economy has recovered substantially, but business and professional services are lagging

Outlook continued

• The health care economy was damaged significantly, and it has a ways to go before it is operating at pre‐pandemic levels

• Twin looming crises: landlords and renters in arears. There will be a wave of evictions

• Repairing Iowa’s labor force will require mostly market improvements. There is very little that state policy initiatives can do in the medium term to facilitate the re‐staffing of businesses

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Finally

The nation’s and Iowa’s economies have been significantly damaged. 

– Full lost job recovery is still a long ways off

– There are sectors that will not likely recover to their previous levels of output and employment

– There will be new or revamped sectors

– There already is, and there likely will continue to be, a shift in occupational preferences

– And emerging policy priorities – infrastructure, clean energy, social services expansions – will emphasize much broader dimensions of economic and community welfare than has been the case conventionally

QUESTIONS???

For a copy of this, feel free to write me at dswenson@iastate.edu