A survey of Iowa business leaders finds the state’s top economic numbers dropped during July, after making a slight recovery in June. The Creighton University survey showed another slowdown for Iowa but economics professor Ernie Goss says the Midwest region as a whole had its best gain since August a year ago.
Goss says, “The overall index, which is a leading economic indicator for the nine-state region, rose above growth neutral indicating that this recession, at least in my judgment, is over.” However, Goss says this will likely be a jobless recovery both for Iowa and for the region. Goss says almost two out of every three the supply managers they surveyed expect more layoffs before the end of the year.
“We may not see any job gains until well into 2010 as the unemployment rate rises,” Goss says. “Our employment gauge was below growth neutral for the month of July, so that certainly wasn’t good and 60-percent of the supply managers indicated that they expect their company to layoff workers in the rest of 2009.”
The prices-paid index, which tracks inflation at the wholesale level, was up significantly in July and Goss says that indicates inflation is on the horizon. He says actions by the Federal Reserve Board over the past year and the federal stimulus package could lead to higher inflation in 2010.
“The Fed has increased the money supply, we’ve got a stimulus package out there, a federal stimulus package, that really hasn’t kicked in yet,” Goss says. “When those begin to simultaneously hit the U.S. market, we’re going to see some excessive inflationary pressures.” In order to combat those increased inflationary pressures, he expects the Fed to raise short-term interest rates at either its November or December meeting.
Companies in Iowa and across the Midwest have not begun to replenish their inventories as show on the survey’s inventory index, which remained below growth neutral. “And of course when that does begin, we’re going to see even more inflationary pressures and again an expansion of the economy,” Goss says. “I think we’re out of the recession certainly in this quarter, the third quarter and the fourth quarter and it’s going to mean more inflationary pressures than the Federal Reserve ever intended.”
New export orders remained below growth neutral for the month and the rebounding U.S. economy pushed imports higher, indicating continued weakness among the U.S. trading partners. “I expect the Iowa’s seasonally adjusted unemployment rate to peak at 6.5 percent, its highest level since 1986, in the fourth quarter of this year,” Goss says.
“The state will continue to shed durable goods manufacturing jobs in the months ahead. However, the pace of these job losses will diminish significantly from the rate experienced earlier this year. Employment in Iowa’s nondurable goods sector, including food processing, has stabilized with no job losses expected for the rest of the year,” Goss says.
