Iowa’s economy showed clear signs of improvement during February, according to the monthly Creighton University survey, but the Russian invasion of Ukraine pushed the survey’s business confidence index to its lowest level since the survey began in 1994.
Creighton economist Ernie Goss says the Midwest economy is “up briskly” but business leaders are still dealing with familiar challenges.
“More than four out of ten of the supply managers ranked supply disruptions,” Goss says. “Of course, with what’s going on in Ukraine now, you’d have to double that, I think, with big concerns. More than one-third indicated that finding and hiring qualified workers was their biggest challenge.” Also, nearly one in five respondents listed “rising input prices” as their top challenge.
While employment figures were up for February for the region, Goss says they’re still down about two-percent compared to pre-pandemic levels, dating back to February of 2020.
“We asked the supply managers about what they expect in terms of a raise for this year — how much of a change in pay do you expect this year? On average, about 3%,” Goss says. “That’s very, very, I would call it modest or even weak, given what’s going on in terms of the overall demand for labor.”
A big issue for the region and nation remains the droves of people leaving the workforce, according to Goss, and he adds, inflation remains very high.
“I don’t expect it to cool anytime soon. The earliest would be Quarter 3 of 2022,” Goss says. “It would depend a lot on what happens in Ukraine. You’ve got the Russian invasion of Ukraine pushing up commodity prices overall and that’s really going to push up inflationary pressures.”
On a zero-to-100 scale with 50 being growth neutral, Goss says Iowa’s Business Conditions Index for February climbed to 60.6 from 56.7 in January.
Since the beginning of the pandemic, Goss says Iowa’s nondurable goods manufacturers, including food processors, have expanded at a solid pace, while durable goods producers, including metal manufacturers, have experienced pullbacks in economic activity.