Economic experts upbeat about Iowa future

DES MOINES – Economic experts said Friday Iowa has turned the corner on the recession but economic recovery will come slower than other parts of the country.

“I see the light at the end of the tunnel,” said Charles Whiteman, interim director for the University of Iowa's Institute for Economic Research. He said the income “trough” hit Iowa in the third quarter of 2009 and since then things have swung position except for job growth.

“The bulk of the recession is behind us, I would say. It's tricky to call,” he added. “The income recession is behind us; the job recession is not behind us yet.”

However, Ann Wagner, a labor market analyst with Iowa Workforce Development, said the latest employment figures indicate layoffs and plant closings in Iowa have “tapered off quite a bit” and nonfarm employment appears to be “turning a corner” and trending upward.

“It looks like we're slowly turning,” she told the Governor's Council of Economic Advisors. “We are expected a turnaround. It will be slow. Most of the economic indicators are looking up.”

Wagner said the manufacturing sector could lead the way to recovery, with Iowa employers reporting more orders and increase worker hours. Whiteman said it appears employers are adding shifts and paying for overtime rather than hiring new workers due to continued uncertainty.

Wagner said total job losses in Iowa hit 46,000 – which translated into a drop in employment by 30,800 and a rise in jobless Iowans by 26,300. She said the recession hit male workers and young people the hardest with major job declines in manufacturing and construction sectors. She said unemployment benefit payouts topped a record $1.2 billion last year, but the state's jobless trust fund remains in good shape at $350 million with another $150 million in reserve.

Ernie Goss, a Creighton University economist who appeared with Whiteman on Iowa Public Television's “Iowa Press” show on Friday, said rural areas will lag Iowa's urban centers in recovering but overall he said agriculture-related exports will be strong contributors to an economic comeback – especially if the U.S. dollar weakens. He said education, health care and government have been bright spots in Iowa's employment picture.

Whiteman told fellow council members he still forecasts a decline in state tax collections for the current fiscal year, but his negative 3.5 percent estimate is nearly 2 percent below what government prognosticators have set. He said he would advise the state Revenue Estimating Conference to “come up a little bit” when it meets Thursday for its quarterly assessment.

“For fiscal 2011, I think we're going to see a rebound,” Whiteman said. While the REC's fiscal 2011 state revenue outlook is essentially flat, the UI economist said he expects tax collections to rebound to more normal growth of up to 6 percent.

Joel Lunde of the state Department of Management said a rebound in state tax collections always lags behind an economic recovery, and REC members tend to err on the conservative side to avoid budget swings. He noted that current year revenues are running about 5.2 percent below last fiscal year so overall he did not think the REC estimate would change much from December's forecast.

Gov. Chet Culver, who participated in the council meeting for awhile by telephone, said he was hopeful for “some pretty positive news” in Iowa's economic future.

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