Ernie Goss

Prolonged trade wars and a continued shortage of qualified workers are two key factors in the weakening Midwestern economy, according to a survey of supply managers in Iowa and eight other states.

Creighton University economist Ernie Goss says the business conditions index sank for the fifth time in the past six months during September.

“The manufacturing economy is slowing down,” Goss says. “The overall index was at 49.1 and that’s below growth neutral of 50.0. Last month it was 49.3. This is the second straight month of below growth neutral readings. This is the lowest we’ve seen since 2016 when we did have a marked slowdown in the regional economy.”

Iowa’s overall business conditions index sank below the 50 point threshold for second straight month in September to 49.6, down from 49.7 in August. For all of 2019, Goss says the region’s economy has been expanding at a pace well below that of the nation. He says the trade war and the global economic slowdown have cut regional growth to about two-thirds that of the U.S.

“Tariffs and the trade war are the most significant short-term factor slowing the overall regional economy,” Goss says. “We asked the supply managers about the impacts of the trade war and 48% said it was having a negative impact on their business.” Goss says many of those surveyed bemoaned the fact too few workers are available to fill open positions and it’s hurting productivity.
“The hiring trends were not good,” Goss says. “We’re seeing pullbacks there. Some of that is because of (the trouble with) finding and hiring qualified workers but also some of it, particularly in urban areas, is actually a pullback of slowing down. Talking about ethanol, for example, an important industry in this part of the country. Ethanol is definitely slowing down.”

In Iowa, two ethanol plants and one biodiesel plant have announced temporary shutdowns in recent weeks. Goss says construction activity remained strong in Iowa during September, adding, both durable and nondurable goods manufacturers experienced solid growth.