The Midwest’s economy slipped slightly during October, as did Iowa’s, according to a monthly survey of business leaders in Iowa and eight other states. Ernie Goss, a Creighton University economist, says the region peaked mid-year and it’s been a gradual, steady decline ever since.
“May is when we started seeing some softness in the numbers,” Goss says. “It’s getting softer and softer and softer. I’m very concerned that unless Congress moves quickly when they come back around November 15th to eliminate some of this economic uncertainty, the major factor there is the tax increase slated to go into effect January 1st.”
Goss says the region’s overall index, a leading economic indicator, is at its lowest reading since December of last year. “I think we could certainly dip back into recessionary territory and that’s even for this part of the country where agriculture is dominant or at least prominent and ag is doing very well,” Goss says. “But if you go outside of agriculture, not nearly as strong.”
Goss says the so-called Bush tax cuts from 2001 and ’03 will expire or sunset on December 31st and for the economy’s sake, he hopes they’re quickly restored by Congress this month. “They need to be extended at least for two years so we can get beyond this economic malaise,” Goss says. “Even though we are out of the recession, it still does not feel like it for most Americans.”
Economic optimism in October soared, Goss says. “This is the first increase in the confidence index since April and one that I did not anticipate,” he says. “Very healthy farm income and record low interest rates combined to boost the economic outlook for firms in the region.” Still, he says consumers need a boost, like an assurance they’re not about to take a major tax hit.
“We’ve gotta’ see some growth from consumers, some growth from business investment and consumption,” Goss says. “We’re not seeing it right now. What will cause that to turn around? Housing markets stabilizing will be very important. We’ve got to see a turnaround in uncertainty. Companies become more certain. Consumers become more certain. Everybody out there is fearful of losing their job.”
Goss says Iowa gained more than 20,000 jobs between December 2009 and May 2010, but has now lost more than 9,000 jobs between May and September of 2010. He says, “If we continue to record solid readings for the state, I expect job growth to once again be in the positive range in the months ahead.”
For the Midwest region, more than 100,000 jobs were added between December 2009 and May 2010, but since this May, the region has lost some 14,000 jobs. Goss says the Creighton surveys in recent months point to positive but very weak job growth in the months ahead.