Des Moines Register
09-27-07
D.M. economy 24th in growth in U.S.
BY DONNELLE ELLER AND S.P. DINNEN
REGISTER BUSINESS WRITERS
The Des Moines metropolitan area had the 24th-fastest-growing economy in the
nation, a report Wednesday showed, with the finance and insurance industry
driving central Iowa's expansion.
The economies of Iowa's nine metropolitan areas all grew from 2004 to 2005, the
most recent information provided. But none expanded as fast as Des Moines at
7.2 percent, according to a report from the U.S. Bureau of Economic Analysis.
The report, which measured gross domestic product for 363 cities across the
nation, also showed:
- Cedar Rapids was the only other Iowa city to rank among the nation's top 100
super-charged cities. Cedar Rapids ranked 57th, with its economy growing 5.6
percent.
- Over four years, the Des Moines area economy grew 21 percent to $27.7 billion
in 2005. The metro area's financial and insurance activity - comprising one-third
of its economy - nearly doubled to $9 billion.
But has Iowa's reliance on insurance and finance become a weakness? National
turmoil in credit markets has sparked cutbacks in consumer spending and
business investment, raising fears of recession.
Some national lenders have gone bankrupt, roiling U.S. and foreign markets and
causing national leaders to call for reforms and bailout funds.
San Francisco-based Wells Fargo, which has its mortgage lending headquarters
based in West Des Moines, has said its exposure to losses in the subprime
market won't adversely affect its performance.
David Swenson, an economic scientist at Iowa State University, said Des
Moines' finance and insurance companies are widely diverse, ranging from
consumer credit and mortgage lending to managing 401(k) retirement benefits.
Wells Fargo and Allied Insurance - and more recently Wellmark, Principal
Financial and Aviva USA - have announced over the past seven years plans to
invest more than $1 billion in new headquarters and offices in the metro area.
The companies also have pledged to create about 6,400 jobs.
"Work in financial services and insurance is something that's not likely to be
outsourced," said John Geweke, an economics professor at the University of
Iowa. "It's stable ... and positions in those industries demand a lot of skills and
are rewarded accordingly."
Steven Weisbart, chief economist at the Insurance Information Institute, said Des
Moines has had "a very successful insurance base for probably a decade." The
city has established itself as a leader in the equity-indexed annuity market, and
insurers that produce that investment aimed at the retirement market have
steadily boosted employment.
Des Moines also has become a hub for property casualty insurance, an industry
that may face near-term challenges from declines in premiums. Still, Weisbart
said insurers are likely to weather any such storm with a decline in profits rather
than resort to layoffs.
Finance and insurance jobs in the Des Moines metro grew 9.2 percent to 47,500
from 2001 to 2005, state employment records show. A total of 48,100 workers
were employed in finance and insurance, an August jobs report showed.
Mike Lipsman, who leads the state's tax research services, said Iowa is
performing better than other parts of the country. "We're still adding construction
jobs and durable goods manufacturing when other parts of the country are losing
them.
"We're not going gangbusters ... but we're doing pretty well," said Lipsman,
whose agency tracks the Iowa economy monthly. One area of concern for Iowa and the nation - is a decline in consumer spending, Lipsman said. Iowa officials
expect a lackluster 1 percent to 3 percent increase in sales tax receipts.
The state analyst said he believes consumers - unable to pull equity from their
homes - are curbing spending. Cutbacks also may be psychological: "People are
anticipating the economy will slow. ... They're waiting for the other shoe to drop."
The challenge for Des Moines is to continue growing, said David Maahs, an
economic development leader at the Greater Des Moines Partnership.
Gov. Chet Culver said the report was good news.
"With Iowa's growth in renewable energy, the financial sector, advanced
manufacturing and biosciences, I believe there will come a day when Iowa's
metropolitan areas will rank even higher," he said.
Reporter Donnelle Eller can be reached at (515) 284-8457 or deller@dmreg.com