Des Moines Register.com
04-10-07
Index shows Iowa economy grows
As for future direction, economists say they're 'a little uncertain'
By DONNELLE ELLER
Register Business Writer
Perhaps Iowa's economy needs that bespectacled guy who advertises the
Verizon communications network.
"We're hoping to get a strong signal that the economy is improving, but it's a little
unclear so far," said Amy Rehder Harris, a fiscal analyst with the Iowa
Department of Revenue.
A state index that's designed to give leaders an idea of economic turns has been
mostly in a holding pattern, stubbornly refusing to move up or down much.
February's leading indicators index climbed 0.2 points to 105.5. The index started
the year a little shaky, falling 0.1 point to 105.3.
"We're a little uncertain about what direction the economy is going," Harris said.
Adding to the forecasting difficulties are concerns about rising gas prices, which
can reduce consumer and business spending, and turmoil in the housing and
lending industries, both of which are strong employers in Iowa.
The index also indicates that employment and manufacturing could see
contractions in upcoming months.
The number of hours factory employees worked in February increased, but an
index that tracks orders for manufactured goods was weak. Also, while Iowa
employment increased, workers filing claims for unemployment insurance
climbed.
Only the farm index - buoyed by corn and soybean prices and hog profits - has
remained consistently strong.
"One reason we're in a holding pattern is because it's hard to believe Iowa's
economy can get much better," said Peter Orazem, an Iowa State University
economist. "People tend to get nervous when things are good, worrying that it
will end."
Iowa's unemployment rate was 3.3 percent in February, coming in lower than the
U.S. rate of 4.5 percent.
"We're about at full employment," Orazem said. "There's not a lot of room for
additional growth."
Iowa wages increased 3.6 percent on average last year, Orazem said, while the
U.S. wages increased 4.0 percent.
"A plateau at this level of employment and wage growth is pretty good," Orazem
said.
Rising gas prices could cut into profits for "intensive energy users" such as
farmers. It also can hurt demand for Iowa products such as the recreational
vehicles made at Forest City-based Winnebago.
But gas prices also improve the market for ethanol and biodiesel, pushing corn
and soybean prices higher.
"Net, it's positive for farmers, although possibly not for hog producers who have
to buy corn," Orazem said. "Or for those of us who want to get away this
summer."
Reporter Donnelle Eller can be reached at (515) 284-8457 or deller@dmreg.com