Iowa's economic indicators fall
By Charlotte Eby, Journal Des Moines Bureau | Posted: Wednesday, January 07, 2009
DES MOINES -- The state's index of economic indicators slipped nearly 1 percent in November, and some are predicting the state's economy will see a further decline in the coming months.
The 0.9 percent drop in the Iowa Leading Indicators Index was a result of rising unemployment claims and other economic statistics across Iowa industries.
The report, released Tuesday by the Iowa Department of Revenue, also showed fewer new residential permits, fewer new orders and a drop in agriculture futures prices compared to November 2007.
Amy Harris, a senior fiscal and policy analyst with the department, said the drop in the index wasn't a surprise.
"We would have liked to have seen the numbers not be quite so bad," Harris said.
Futures prices for Iowa's main commodities -- corn, soybeans, hogs and cattle -- previously had been a strong component of the indicators index. But in the last two months, they've gone negative as the commodity markets have fallen, she said.
Harris said the index, still moving in a negative direction, is not yet showing the economy bottoming out.
National economic indicators started showing the downturn in early 2008 while Iowa's indicators were still going up, Harris said.
"We knew we weren't immune from the housing slowdown and its impact on manufacturing, and so it's coming home now," Harris said.
Iowa also is starting to see the impact of reduced exports as other countries are hit with the slowdown, Harris said.
Components of the index tied to manufacturing, including the measure of new orders, continued to be weak in November. Diesel fuel consumption, which helps measure demand for shipping of goods, dropped 10 percent in November compared to the same month a year ago.
"That was kind of a big drop that we didn't expect," Harris said.
Weekly manufacturing hours, which hovered at close to 40 hours per week, suggests many Iowa workers aren't seeing overtime, according to Harris.
Harris said the rise in unemployment claims looks as if it could have been driven by seasonal layoffs around the Thanksgiving holiday that were slightly higher than in the past and might not be as bad as the numbers suggest.
Mike Ralston, president of the Iowa Association of Business and Industry, said some of the organization's members are doing well and continuing to hire while many others don't expect a turnaround until the third quarter of the year at the earliest.
"We'd all like to see the numbers stronger, that's for sure," he said.
Some Iowa manufacturers that are tracking future orders see the third quarter as opportunity for positive growth, he said.
But at this point, Ralston said 40-hour workweeks are the norm among manufacturers.
"The one big thing is that overtime has gone away," he said.
Ernie Goss, a professor of economics at Creighton University, said Iowa's economy has been trending downward since the floods in June.
"There are lots of reasons -- the national economic downturn, you've got farm income, which is softening, you've got ethanol production, which is not doing as well, and you've got some of the large durable goods producers not doing as well," Goss said.
The state has lost about 3,000 jobs since August, he said, pointing to the Mid-America Survey of Supply Managers which predicts the economy will continue to move lower in the months ahead.
Charlotte Eby can be reached at 515-422-9061 or chareby@aol.com.
The 0.9 percent drop in the Iowa Leading Indicators Index was a result of rising unemployment claims and other economic statistics across Iowa industries.
The report, released Tuesday by the Iowa Department of Revenue, also showed fewer new residential permits, fewer new orders and a drop in agriculture futures prices compared to November 2007.
Amy Harris, a senior fiscal and policy analyst with the department, said the drop in the index wasn't a surprise.
"We would have liked to have seen the numbers not be quite so bad," Harris said.
Futures prices for Iowa's main commodities -- corn, soybeans, hogs and cattle -- previously had been a strong component of the indicators index. But in the last two months, they've gone negative as the commodity markets have fallen, she said.
Harris said the index, still moving in a negative direction, is not yet showing the economy bottoming out.
National economic indicators started showing the downturn in early 2008 while Iowa's indicators were still going up, Harris said.
"We knew we weren't immune from the housing slowdown and its impact on manufacturing, and so it's coming home now," Harris said.
Iowa also is starting to see the impact of reduced exports as other countries are hit with the slowdown, Harris said.
Components of the index tied to manufacturing, including the measure of new orders, continued to be weak in November. Diesel fuel consumption, which helps measure demand for shipping of goods, dropped 10 percent in November compared to the same month a year ago.
"That was kind of a big drop that we didn't expect," Harris said.
Weekly manufacturing hours, which hovered at close to 40 hours per week, suggests many Iowa workers aren't seeing overtime, according to Harris.
Harris said the rise in unemployment claims looks as if it could have been driven by seasonal layoffs around the Thanksgiving holiday that were slightly higher than in the past and might not be as bad as the numbers suggest.
Mike Ralston, president of the Iowa Association of Business and Industry, said some of the organization's members are doing well and continuing to hire while many others don't expect a turnaround until the third quarter of the year at the earliest.
"We'd all like to see the numbers stronger, that's for sure," he said.
Some Iowa manufacturers that are tracking future orders see the third quarter as opportunity for positive growth, he said.
But at this point, Ralston said 40-hour workweeks are the norm among manufacturers.
"The one big thing is that overtime has gone away," he said.
Ernie Goss, a professor of economics at Creighton University, said Iowa's economy has been trending downward since the floods in June.
"There are lots of reasons -- the national economic downturn, you've got farm income, which is softening, you've got ethanol production, which is not doing as well, and you've got some of the large durable goods producers not doing as well," Goss said.
The state has lost about 3,000 jobs since August, he said, pointing to the Mid-America Survey of Supply Managers which predicts the economy will continue to move lower in the months ahead.
Charlotte Eby can be reached at 515-422-9061 or chareby@aol.com.
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