Iowa’s economic recovery more complex than jobless rate, economist says

Iowa’s unemployment rate has continued to decline after reaching record-high levels a year ago, leading to plenty of optimism from government officials and business leaders alike.

But Dave Swenson, an economist at Iowa State University, believes Iowa’s economic recovery isn’t quite what it looks like at first glance.

“Even though Iowa’s economy looks like it’s really on track to recover, it’s not really recovering the way people think it has,” Swenson said. He discussed Iowa’s economy with The Gazette:

Q: On a scale of one to 10, where do you see Iowa’s economic recovery right now?

A: “I wouldn’t give it higher than a 5. … Iowa is really happy about its relatively low unemployment rate. It’s at 3.6 percent right now. That rate has dropped considerably since last April. But 64 percent of the improvement in that unemployment rate is due to people leaving the labor force, so this pandemic has done some damage to Iowa’s workers. … It improved a little bit in January and February, but it is still substantially lower than before we had this pandemic.”

Q: What is the future of Iowa’s economy after the pandemic:

A: Iowa’s economy “was underperforming or non-performing in terms of growth as we went into the pandemic, so a big question for me is, ’Well, what is Iowa’s economy going to look like coming out of this pandemic if it wasn’t growing before?’ And we could argue that was because of trade policies and some suppression or depression in the ag sector, and both of those factors have changed. Is that enough to post significant recovery growth as we move through this pandemic recovery period? I don’t know yet. I don’t know that what the rest of the country and the rest of the world wants that’s made in Iowa is going to grow that rapidly. We still have a lot to learn about the quality of our economy.”

Q: What were the differences in how COVID-19 economically affected urban areas and rural areas in Iowa?

A: “The most rural areas were probably the least affected. And that’s because if they were ag-dependent or given the nature of manufacturing, they probably didn't see significant changes in employment in those core industries, versus urban areas where you’re going to find a disproportionate concentration of losses in those big categories, which are going to be leisure and hospitality, health care and construction. Those kinds of jobs would have been much more vulnerable. The urban areas, though, have a lot more industries where people could work from home, as compared to perhaps much of the rural areas, so there’s going to be somewhat of a mix. But as far from what we can tell, there isn’t any significant rural-urban difference that stands out.”

Q: Do you see this as a gradual return of people to the labor force or a quicker one as people get vaccinated?

A: “I think it’s a combination. … National numbers indicate much more reduction in labor force participation among women, and that includes women of childbearing ages. If you have had, for one reason or another, to leave the workforce because of family or pandemic-related responsibilities, your career path has severely interfered with your ability to come back into your old job.”

Q: There was a lot of talk earlier in the pandemic about possibly having a K-shaped recovery where some groups see a stronger recovery and other groups are left behind. Do you see that playing out?

“No, what we had was that sharp recovery from April through May, June and July, and then that recovery now has really tailed off. It’s flattened off. It’s a reverse or backward-looking square root sign recovery.”

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