By DONNELLE ELLER email@example.com May 4, 2010
Iowa's economy is digging in on the road to recovery, according to a new report that showed six consecutive months of growth.
Despite the improvements, though, job growth continued to show weakness.
Iowa's Leading Indicators Index for March showed broad improvement in the economy - from rising prices for shares of Iowa companies to increasing homebuilding activity and higher demand for manufactured goods.
The index, which looks at eight economic components, climbed 1 percent to 98.2 in March over February - the largest gain in the report's 11-year history.
"We see that many of the indicators are returning to normal levels, but we still have a ways to go," said Amy Harris, an analyst for the Iowa Department of Revenue and Finance, the agency that compiles the report.
She noted that March's improvements reflected Iowa's sharp economic losses a year ago. "Part of the gains are driven by how bad the economy was a year ago," she said.
Iowa had 43 percent fewer initial unemployment claims in March, for example, but the cla ims were still 109 percent above the average March claims from 1987 to 2008.
"People are still losing their jobs, and that's always scary for the economy," Harris said.
On Friday, CDS Global said it would lay off 70 workers in Des Moines and 200 people in Red Oak, where it will close a magazine subscription processing center by July 1.
Iowa leaders don't expect strong job growth until the third quarter of the year, said Kerry Koonce, a spokeswoman for Iowa Workforce Development.
"Employment is a lagging indicator," she said. "You have to have spending go up. You have to have consumers buying before manufacturers will make more products.
"We need to see the other indicators improve before employment does. So the report is positive," she said.
Iowa has recovered some of the 65,000 jobs it has lost in the recession, which gripped the state more than a year ago. In the first quarter, Iowa added about 15,000 jobs, data showed.
"We need several months of growth to get our unemployment rate down," Koonce said.
Iowa's unemployment rate was 6.8 percent in March, with 114,600 workers without jobs. A year earlier, Iowa's jobless rate was 5.5 percent.
Harris said Iowa's manufacturers showed some of the strongest improvements, including factory hours worked and demand for manufactured goods. Diesel fuel - used by trucks to move goods - also climbed in March.
An index used to track demand for manufactured goods - called the new orders index - hit the highest level since July 2004, Harris said. That's good for Iowa, a state that relies on manufacturing for about 21 percent of its gross domestic product.
Michael Lynch, president of Manpower of Des Moines, said several manufacturing clients are increasing business ahead of their forecasts.
"We're struggling to find machinists and machine operators," he said.
Lynch said job demand is improving but still weak. Companies are hesitant to hire full-time workers, especially since many have gone through "horrible, painful layoffs," he said.
Lynch expects companies to increase overtime or hire more temporary workers before hiring permanent employees.
"Companies want to make sure earnings and the recovery are solid," he said. "My gut says it will be another six months before hiring picks up broadly."
Harris said she was encouraged that the number of residential building permits had doubled from March 2009, although it still remained one-third below historic levels.
"Housing sector improvements lead to all kinds of other consumer purchases," she said.
John Solow, a University of Iowa economist, said the housing market should rebound faster in Iowa than it has in places like Florida, Arizona and California, where foreclosures have pummeled prices and left neighborhoods filled with vacant homes.
He added that the building permit data could reflect rebuilding in cities like Cedar Rapids and Iowa City from flooding two years ago.
"Low interest rates, rising income and greater security about jobs leads people to be inclined to buy or build a house," said Solow. "It's the biggest investment most Americans make. They want to feel pretty secure about their ability to pay for it."