[Announcer] A sluggish agriculture economic system, layoffs in varied industries enhance prices of residing. We’ll get insights from two economists on this version of Iowa Press.
Funding for Iowa Press was offered by Buddies, the Iowa PBS Basis. The Related Basic Contractors of Iowa, the general public’s companion in constructing Iowa’s freeway bridge and municipal utility infrastructure. Throughout Iowa, lots of of neighborhood banks try to serve their communities, present jobs, and assist native companies. Iowa banks are proud to again the life you construct. Study extra at iowabankers.com.
For many years, Iowa Press has introduced you political leaders and newsmakers from throughout Iowa and past. Celebrating greater than 50 years on statewide Iowa PBS, that is the Friday, July 4th version of Iowa Press. Right here is Kay Henderson.
[Henderson] So is the economic system up or down or I suppose it is throughout us and our two company at this time know rather a lot concerning the economic system, and so they have been earlier company on the present. Let’s welcome them again. Peter Orazem is an Iowa State College professor of economics, and he is proper now at this time, the interim division chair at Iowa State College’s Division of Economics. Welcome again.
[Orazem] Thanks. Thanks for having me.
[Henderson] And congratulations. And Chad Hart is a professor of economics at Iowa State College. And his experience is in agriculture and finance.
[Hart] Sure, ma’am. Thanks.
[Henderson] Becoming a member of our dialog at this time is Stephen Gruber-Miller of the Des Moines Register and Erin Murphy of the Gazette in Cedar Rapids. And earlier than we let Erin ask a query only for our viewers, we have to announce that we’re recording this on Wednesday to accommodate everybody’s schedules over the vacation. So, some issues that you could be know on Friday or Sunday, we do not know on Wednesday.
[Murphy] Effectively, let me ask you people, each, Kay talked about, is the economic system up or down by one measurement? We have now a latest report, federal knowledge, that mentioned Iowa’s GDP grew by -6.1% within the first quarter of the 12 months. And never solely is that down, that is a lot worse than virtually all the remainder of the states within the nation. Nebraska close by additionally had the identical. Quantity. Peter, let’s begin with you. Why such a tough quantity for Iowa within the first quarter of 2025?
[Orazem] Effectively, Iowa has not been doing significantly effectively in comparison with the remainder of the U.S. For a few years. So, we began rising extra slowly than the U.S. In 2018. And when you return to the beginning of the pandemic, we have really not added any jobs. So, I do not assume Iowa has been doing significantly effectively, not simply within the final quarter, however for the final seven years.
[Murphy] And Chad Hart, 22% of Iowa’s economic system is said to AG. Is there something happening within the ag economic system? And we’ll get deeper into that later. However as we take a look at this latest quantity, these latest struggles, is the ag sector play into that?
[Hart] Effectively, the ag sector took a step again really a few years in the past. And I might say we’re nonetheless feeling the ramifications of that. If you happen to take a look at our GDP, the AG drop actually occurred in 2024. And now I believe what you are seeing is the observe by impact of that. As a result of once we take into consideration agriculture right here in Iowa, it impacts all the opposite sectors as effectively. When you consider one of many largest sectors, authorities clever, Division of Agriculture, when you consider what is the greatest factor on an actual property aspect, that is farmland values insurance coverage, the crop insurance coverage business is a significant business right here. And so, when you consider AG slows down all these different industries are associated to that decelerate as effectively.
[Murphy] To both of you, perhaps assist us perceive why just a little extra. Why is Iowa struggling greater than different states? And once more, particularly on this most up-to-date quarter, Iowa and Nebraska, a lot extra even than neighboring states, comparatively talking, like South Dakota, Missouri and Nebraska. Both of you gents need to weigh in on why it was such a tough quarter right here?
[Orazem] Effectively, when you return to the pandemic, atypically, the individuals who left the labor market had been individuals over the age of 55. And Iowa goes into the pandemic as one of many older labor forces within the nation. And so, one of many issues that Iowa has confronted for the reason that pandemic restoration has been we merely do not have sufficient staff to fill to fill jobs. And atypically in comparison with different states. So, Florida is outdated, however the outdated individuals in Florida had been Iowans who went to Florida as a result of they did not need to proceed working. The Iowans who had been persevering with working stayed right here. The opposite drawback is immigration. So, immigration was just about reduce down in the course of the pandemic and has continued to be comparatively sluggish within the post-pandemic restoration. 38% of Iowa’s inhabitants progress has been immigration since 2000. So atypically, we depend on immigrants to assist shore up our comparatively sluggish inhabitants progress. And I believe the labor market lack of staff is has been one of many explanation why Iowa’s carried out comparatively poorly during the last six years.
[Hart] After which I will play off of that. If you’re fascinated about the agricultural economic system, Iowa tends to be extra crop centered, and arguably it is the crop aspect of agriculture that is struggling greater than livestock proper now. Given Iowa’s management within the corn and soybean aspect, which means we’re feeling extra of a pull down there. You mix that once you take a look at our manufacturing, ag manufacturing, massive a part of that, we consider Deere. We consider Kinsey. All proper. If the farm economic system slows down, we all know these decelerate. We have seen the layoffs over the previous 12 months with these two massive giants, together with loads of different smaller companies doing that. And so, it is smart that, yeah, I used to be seeing form of the worst of this proper now.
[Gruber-Miller] We’ll transfer on to a few questions concerning the federal invoice that is making its method by Congress. Once more, that is Wednesday. So, the Senate has handed President Trump’s giant tax invoice, which might lengthen the 2017 tax cuts, have some extra tax cuts and has spending reductions for Medicaid and Snap and different issues. I need to ask a few questions on this invoice. So first, if it does not cross the 2017 cuts would expire. And if that had been to occur, I am questioning what sort of influence do you assume we might see? Peter, we’ll begin with you.
[Orazem] Effectively, I imply, will increase in tax charges are going to decrease each funding and decrease work incentives. So, you are more likely to have some a consequence as from these tax cuts. However they’re nonetheless going to tax cuts by themselves. Change issues on the margin. They are not going to have big results on both funding or labor provide.
[Hart] Yeah. I believe what you had been speaking about there, once we’re wanting on the common Iowan, I need to say it is round $3,000, is what these tax cuts find yourself being. Once we’re wanting throughout the parents right here. However as you are wanting, I believe the larger points is perhaps together with these tax cuts, as you talked about, there’s loads of reductions in spending once we’re that, that invoice. And that is going to influence Iowa in loads of methods. As we’re cuts in Medicare and Medicaid, as we’re cuts on the ACA. So, availability of insurance coverage, I believe we’ll see extra impacts by these channels essentially than we by the tax cuts.
[Gruber-Miller] Yeah. Get into what a few of these could be. Proper. You talked about as a result of we might discuss influence on hospitals with SNAP. We might discuss influence on, , farmers grocery shops in addition to individuals who will not have that cash to spend. Are you able to assist us perceive what a few of these ripple results could possibly be?
[Orazem] Effectively, if they do not cross the legislation, the brand new legislation, then among the outdated Snap advantages and Medicare advantages proceed on. So, there’s form of some positives and a few negatives. I believe when you take a look at it that method.
[Gruber-Miller] If it had been to cross, although.
[Orazem] If it had been to cross one of many potential points for Iowa is the rollback of subsidies for, for wind power, which after all has been an space of progress for the Iowa economic system for a few years. And so that may be one of many issues that you simply may see is, is discount in new funding in wind technology.
[Hart] If you talked about SNAP, the concept is we’re doubtless going to see, , greater necessities on people so far as work necessities. You understand, on this case, when you’re a father or mother of anyone 14 or youthful, you are going to have to fulfill some work necessities. There. Anyone of working age received to fulfill some necessities there. They will be 80 hours. That is required to qualify, , to fulfill these work necessities. So these are stronger than they’ve been prior to now. It may restrict what number of people can qualify immediately. After which once more, those who may want it, what number of can’t qualify or discover it onerous to qualify for these advantages. As we glance ahead. So, I believe the problem right here although is, is that this invoice, these necessities are nonetheless evolving over time. In reality, that is one of many issues we’ll be watching as we take a look at this invoice, head again to the Home. The Senate did make some substantial modifications there. The Home goes to have to regulate. When can we coalesce round, let’s name it a standard algorithm that we’ll play with right here?
[Henderson] Let’s speak concerning the Iowa agenda right here legislators of the Republican Get together have mentioned property tax aid is their prime precedence heading into the 2026 legislative session. Governor Reynolds was on this program, mentioned she’s going to give you a property tax plan, meet with native officers. Peter, how troublesome will or not it’s to give you some form of property tax aid proposal? You have got you’ve gotten former expertise as an area.
[Orazem] Effectively, I used to be on the, on the Ames Metropolis Council, however I’ve additionally finished analysis on, on property taxes and, and it seems property taxes are most likely extra painful for issues like startups. And Iowa does very poorly on startups in comparison with the remainder of the nation. And that is one other factor that is been dragging down the Iowa economic system. I imply, when you’re a model new agency, you haven’t any revenue and you haven’t any gross sales, however you continue to have property. And so, it’s a must to pay property tax even when you’re not paying a lot in revenue tax or gross sales tax. And so, however after all, the property taxes is an area authorities initiative and the state restricts the flexibility of the native authorities to make use of different taxing strategies. Proper. So, the gross sales tax could also be comparatively modest by way of its opposed financial results in comparison with the property tax. However we restrict the flexibility of the native authorities to make use of gross sales tax. And so, in the event that they need to in the reduction of on property tax, I believe they’ve to consider their taxes extra broadly and whether or not or not we need to enable native governments to fulfill their monetary wants utilizing among the different, maybe much less damaging or much less — hatever the appropriate time period could be for decreasing funding, I got here at a loss.
[Henderson] Effectively, the main target appears to be, as we have been protecting the talk, the three of us is on residential race, not on industrial and enterprise. Does that appear it needs to be the flip?
[Orazem] Effectively, a very long time in the past, Iowa determined to tax residential property at about half the speed of economic property. They usually’ve been regularly decreasing that hole. But when you consider it, what which means is that companies take the disproportionate share of the price of native authorities away from residences, regardless that you’ll presumably argue that not less than the advantages from public providers are equally shared by companies and residential areas, I am not fully positive what they plan to do for residential areas, however one factor you’ll be able to say is residences. Vote, and companies do not. So, from that perspective, my guess is it might be just a little bit troublesome to rebalance the burden away from companies towards residential property homeowners.
[Henderson] The ag land in Iowa’s tax on a formulation. And we’re not going to have a quiz about the way it works. However you earlier talked about that, , the worth of farmland is type of a difficulty in the entire evolving ag economic system. If there have been a property tax aid plan that addressed residential and perhaps enterprise and never ag land, would that impact the ag neighborhood?
[Hart] I imply, it might have an effect on the ag neighborhood, however once we’re wanting right here as effectively, one of many massive challenges once you’re agriculture, as we already talked about, the ag economic system is already struggling. Are you seeking to essentially enhance the tax burden on a sector that’s already coping with its personal monetary issues right here, regardless that once you’re ag land, for instance, it’s nonetheless holding at very sturdy values? In reality, that is one of many form of catch 22 that farmers are going through proper now. What they’re going through is restricted money circulation. They’re having struggles, if you’ll, paying the payments. However have they got belongings obtainable to them? They do, however they’re long-term belongings. They’re locked up within the land. The outdated saying is farmers are usually asset wealthy and money poor.
[Murphy] So how once more, talking of the ag economic system and inspiring people who’re on this to stay round for market to market, however to steal just a little little bit of their work right here? What’s the method out of this then for the Iowa agriculture economic system? What’s the best way ahead? What helps rebound from the doldrums? It has been combating by right here.
[Hart] Effectively, agriculture is rather like the overall economic system. It goes by cycles. And proper now, arguably what we’re experiencing in agriculture is an issue of productiveness. What has actually occurred right here is that we have been capable of outproduce what is definitely actually good demand for our merchandise proper now. In reality, let me tear aside the corn marketplace for a second. Proper now, as we watching corn, the corn we grew on the, , harvested on the finish of 2024, we introduced in a really sizable crop. In reality, I believe it was the third largest crop we have ever had. Once we take a look at the demand, the utilization of that corn, it is really at document ranges proper now. However that is not essentially pushing costs greater. Why? As a result of, effectively, we had the third greatest crop final 12 months. We’re projected to have the most important crop approaching document this 12 months. We’re out producing that document utilization and that has pushed costs down and is limiting the place the ag economic system can go. That mentioned, as we’re wanting ahead in these cycles, what goes down tends to return again up once more in a number of years. We’re simply form of ready for the flip.
[Gruber-Miller] So, one other coverage that impacts the ag economic system, but in addition different sectors, together with development, manufacturing and all kinds of issues is the tariff coverage by President Trump. We have they have been just a little bit cease begin. A few of them have come on. They’ve come off once more. They could be coming again on later this month. However what influence does which have? We’ll begin with ag and simply, , the negotiating work in the direction of getting a few of these longer-term commerce offers, like what might that do for the ag economic system.
[Hart] So, the ag proper now, the ag sector I might say is treading water proper now, ready to see how this tariff regime goes to settle out. For our farmers the massive factor they should fear about just isn’t the tariffs which might be put in right here within the U.S., it is how different nations reply to these tariffs. And proper now, we’ve not seen loads of responses from different nations due to the on once more, off once more nature of what we’re seeing right here inside the U.S. In reality, as I take a look at export gross sales proper now for outdated crop, for the crop we grew final fall, very sturdy proper now. However as I take a look at superior gross sales for the crop we’re rising proper now, these are weak once more, ready to see what is going on to occur on the tariff platform right here. Once we’re equipment, although, it is a a lot completely different deal. They’re feeling the pinch of the tariffs that the U.S. Has placed on. Metal and aluminum have went up. That is a part of the explanation why you proceed to see John Deere Kinsey maintain for example maintain issues slowed down. They are not seeking to develop. In reality, they’re seeking to nonetheless shrink and consolidate to deal with these extra prices of the tariffs.
[Gruber-Miller] And Peter, how concerning the influence of tariffs on different sectors of the economic system?
[Orazem] Effectively, I imply, Iowa can be very export oriented in its economics. I imply, we can’t take up all of our manufacturing and agriculture or all our manufacturing in, in manufacturing of agricultural implements domestically. Proper? We’re oriented and we have now a comparative benefit in producing for worldwide markets. And so, something that restricts our capability to promote overseas goes to indicate up in a lack of wealth right here in Iowa. And I believe that is one of many explanation why Iowa has carried out comparatively poorly. And when you take a look at a few of our neighboring states, they’ve additionally been performing comparatively poorly over the previous few years. The tariffs that began in 2018 have, actually modified who we are able to promote to. And I believe the uncertainty exhibits up within the costs that you simply observe for these commodities. It is probably not I let’s hope that we are able to promote every thing that we produce. We all know we’ll promote every thing we produce. However the query goes to be, what’s that value going to be outdoors of agriculture in Iowa? We’re not as uncovered to. Tariffs. And so, I believe I believe a lot of the impact in Iowa goes to be in within the agricultural sector particularly. After which the manufacturing that providers that, that agricultural producer.
[Henderson] Past the Deere layoffs, there have been layoffs at different manufacturing amenities, and there have been some closures the place companies say that is an outdated plant, I am unable to use it anymore. I will shut it down. So, speak concerning the manufacturing unit manufacturing outlook for Iowa. Peter, for only a second, it’s it time for like a retooling and if that’s the case what kind of spurs that. Are we going to see extra of those plant closures? As a result of Iowa’s manufacturing base is older by way of what’s inside these manufacturing vegetation.
[Orazem] I believe the larger drawback for manufacturing has not been capital. It has been labor. And so, when you take a look at manufacturing in Iowa for some time, our non-durables, our meals manufacturing was outpacing the remainder of the U.S. Within the put up pandemic restoration. And that is really slowed down. So, when you take a look at each sturdy and non-durable employment progress, Iowa within the final 12 months is lagging the remainder of the nation. And we have really given away jobs in each of these sectors Actually, there’s going to be some retrenchment, however loads of the retrenchment in, say, meals manufacturing and meatpacking and so forth that occurred a number of years in the past. And you continue to see, for instance, within the Perry closing, new corporations coming in to attempt to reap the benefits of the amenities. The true query is how many individuals are going to be in these amenities. So, the Perry plant that closed, we misplaced much more jobs than the variety of jobs which might be coming again with the brand new plant.
[Murphy] Peter, you talked about one thing earlier relative to inhabitants progress right here in Iowa, which has been a battle, and immigration as part of that equation. I wished to circle again to that. If you discuss looking for methods to develop Iowa’s inhabitants after which the brand new federal immigration coverage, are these two issues at odds with one another?
[Orazem] Actually they’re. However Iowa’s had an issue with attracting immigrants relative to, say, the businesses on the coasts for a few years, as a result of we do not have loads of giant companies. And so, when you take a look at H-1b visas, that are the visas that you need to use to usher in new worldwide school graduates, we simply do not have giant sufficient companies to compete for these issues. And so, all of them get swept up by the metas and, and, and, and, and Amazon and so forth. And for instance, I had a scholar who was a double main in aeronautics and aeronautical engineering and economics. She couldn’t get a job in america as a result of she couldn’t get an H-1b visa. Our corporations are at a drawback right here in Iowa, and I believe politically, we needs to be considering of the way of adjusting the foundations on H-1b visas. So smaller corporations can entice in addition to bigger corporations, maybe by pooling the H-1b visas on the state stage.
[Murphy] And Chad, this impacts clearly, the AG economic system as effectively. And to the purpose of the final query about plant closures and layoffs, these meals processing vegetation typically make use of loads of immigrant populations. What, , how a lot are these issues? You understand, at situation with an immigration coverage that is taking a a lot more durable line on deportation.
[Hart] Agriculture once you take a look at giant throughout the nation, positively depends upon immigrant labor to fill in loads of the gaps that we have now inside the labor drive. Once we’re wanting right here in Iowa, it tends to be extra centered on, as you say, meat processing, the place we do see the bigger impacts. However even once we’re speaking about on the farm, you do see immigrant labor getting used on the farm as effectively. In reality, Iowa farmers are pretty aggressive in making an attempt to usher in worldwide labor to assist them alongside, particularly expert labor. On the subject of a few of our bigger farms inside the state. So yeah, immigration positively issues in terms of Iowa agriculture, and that is one of many challenges everyone proper now throughout the state is scrambling to search out the expert labor that they want.
[Orazem] One of many causes you find yourself with undocumented staff in america, as we merely don’t add to the variety of authorized immigrants that we are able to deliver. So, when you take a look at the quotas, these had been set in 1990 per nation. And so, one of many causes you see an issue with undocumented staff is the U.S. Is starved for labor. So, when you look traditionally, the variety of unfilled vacancies per thirty days is now round 45%. Earlier than the pandemic, it was round 5%. So, you was you’ll be capable to fill all of your vacancies in a month, and that is not the case. However when you look, for instance, on the guidelines for authorized agricultural labor right here in Iowa, a lot of the agricultural labor goes for use in in elevating livestock. But it surely’s a year-round enterprise. And the H-2a visa guidelines say, effectively, it’s a must to be right here quickly. And it is oriented towards harvesting vegatables and fruits. It isn’t oriented towards the kind of agriculture we have now right here in Iowa.
[Gruber-Miller] So, I believe we simply have a pair minutes left. I wished to ask, we have referenced a few occasions modifications to the economic system as ensuing from the pandemic, and one of many ones I have been interested by is like downtown utilization by way of workplace vacancies and issues like that. We’re seeing extra distant work, companies giving up downtown, actual property. And I am type of questioning if we are able to learn something into what the long-term tendencies are for the way cities can develop with these a few of a few of these issues occurring?
[Orazem] Effectively, I imply, Des Moines definitely sees a few of that. So, you see some repurposing of buildings. It isn’t as simple as I might have thought to, to transform an workplace constructing into, say, excessive rise residences, as a result of the plumbing is not oriented towards having much more loos. For instance, interspersed by all of the, all of the all the ground house. However I believe you are going to see not maybe much less so in Des Moines. I imply, the locations the place you see the most important drops in rents are in in locations like San Francisco and New York, the place the rents had been astronomically excessive to start with. And an organization has each incentive to shrink their publicity to that. These prices and let individuals work from someplace else.
[Henderson] Effectively, we have now to name this dialogue to a detailed at this second. Thanks each for being right here at this time.
[Hart] Thanks.
[Orazem] Thanks for having us.
[Henderson] You possibly can watch each episode of Iowa Press at iowapbs.org. For everybody right here at Iowa PBS. Thanks for watching at this time.
[Announcer] Funding for Iowa Press was offered by Buddies, the Iowa PBS Basis. The Related Basic Contractors of Iowa, the general public’s companion in constructing Iowa’s freeway, bridge and municipal utility infrastructure. Throughout Iowa, lots of of neighborhood banks try to serve their communities, present jobs, and assist native companies. Iowa banks are proud to again the life you construct. Study extra at iowabankers.com.
