A monthly survey of bank CEOs in rural areas of a 10-state region that includes Iowa found modest improvement in August with continued problems in the agricultural sector.
The Creighton University Rural Mainstreet Index increased slightly to 44.7, from July’s 44.1, representing the sixth straight month with a reading in a recessionary economic zone.
“Farm commodity prices are down by 10.4 percent over the last 12 months,” said Ernie Goss, professor of regional economics in Creighton’s Heider College of Business.
“Despite the initiation of $32 billion in (U.S. Department of Agriculture) farm support payments in 2020, only 8 percent of bankers reported their area economy had improved compared to July, while 18.4 percent said economic conditions had worsened.”
Approximately 45.8 percent of bank chief executives with ethanol plants in their area reported temporary shutdowns. The remaining 54.2 percent indicated ethanol production expanding at a slow pace.
More than three of four bankers reported negative COVID-19 economic impacts on their local economy.
“Business shutdowns linked to COVID-19 continue to harm the region’s retailers,” Goss said.
Layoffs in August exceeded new hiring with an index of 47.4, down from 50.0 in July.
Data from the U.S. Bureau of Labor Statistics indicate employment levels for the Rural Mainstreet economy are down by 225,000, or 5.1 percent, compared to pre-COVID-19 levels.
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“It will take many months of above growth-neutral readings to get back to pre-COVID-19 employment levels for the region,” Goss said.
The August Rural Mainstreet Index for Iowa increased to 46.8 from July’s 43.1. Compared to the same month last year, Iowa’s Rural Mainstreet economy has lost 8.5 percent of its employment representing 58,000 jobs.
Creighton’s survey was conducted after a hurricane-force derecho storm slammed into parts of Iowa on Aug. 10. Goss said it was based on what was known about the storm’s impact on agriculture and the economy.
The U.S. Ag Department has reported 57 counties in Iowa were in the path of the derecho, with 8.2 million acres of corn and 5.6 million acres of soybeans likely to be affected — roughly 43 percent of Iowas crop.
Goss said the loss of a portion of the corn crop also will affect ethanol producers, who likely will have to pay higher prices in the near term for corn.
Goss said Creighton’s monthly business conditions survey, which will be released Tuesday, could provide a better picture of the storm’s impact.